Surge Energy Inc.

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NOTICE OF SPECIAL MEETING OF ASTRA OIL CORP.

– AND –

NOTICE OF SPECIAL MEETING OF SURGE ENERGY INC.

– AND –

NOTICE OF APPLICATION TO THE COURT OF QUEEN’S BENCH OF ALBERTA

– AND –

JOINT MANAGEMENT INFORMATION CIRCULAR

FOR SPECIAL MEETING OF THE SHAREHOLDERS OF ASTRA OIL CORP. AND SPECIAL MEETING OF THE SHAREHOLDERS OF SURGE ENERGY INC.

EACH TO BE HELD ON AUGUST 17, 2021

WITH RESPECT TO A PROPOSED PLAN OF ARRANGEMENT INVOLVING

SURGE ENERGY INC.,

ASTRA OIL CORP. AND

THE SHAREHOLDERS OF ASTRA OIL CORP.

JULY 16, 2021

Unless otherwise stated, the information herein is current as of July 16, 2021

This document is important and requires your immediate attention. If you have any questions as to how to deal with it, you should consult your investment dealer, broker, lawyer or other professional advisor. If you are a Surge Shareholder and require assistance in voting or have questions regarding the information in this circular you may contact Shorecrest Group, Surge’s proxy solicitation agent, toll-free at 1 (888) 637-5789, locally at (647) 931-7454 or by email at [email protected].

No securities regulatory authority or stock exchange has expressed an opinion about, or passed upon the fairness or merits of the transaction described in this document, the securities offered pursuant to such transaction or the adequacy of the information contained in this document and it is an offense to claim otherwise.

Neither the Toronto Stock Exchange or any securities regulatory authority has in any way passed upon the merits of the plan of arrangement described in this information circular.

LETTER TO AOC SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	i
LETTER TO SURGE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	iii
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF ASTRA OIL CORP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	v
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF SURGE ENERGY INC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	vii
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
NOTES ON RESERVES DATA AND OTHER OIL AND GAS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
GLOSSARY OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
SUMMARY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
MATTERS TO BE ACTED UPON AT THE AOC MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
MATTERS TO BE ACTED UPON AT THE SURGE MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Surge Share Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Surge Share Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	28
THE ARRANGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	29
Background to and Reasons for the Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	29
AOC Supporting Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Recommendations of the AOC Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Recommendations of the Surge Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	32
Effect and Details of the Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33
Court Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
Timing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
The Arrangement Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
Termination Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
AOC Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	43
Surge Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	43
Stock Exchange Listing Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	43
AOC Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	44
Procedure for Exchange of AOC Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	45
AOC Dissent Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	47
Interests of Certain Persons or Companies in the Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	48
Expenses of the Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	49
Securities Law Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	49
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	50
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	57
Risk Factors Related to the Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	58
Risk Factors Related to Surge Following Completion of the Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	59
Risk Factors related to the Surge Share Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	60
INTERESTS OF EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	60
INFORMATION CONCERNING AOC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	61
INFORMATION CONCERNING SURGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	61
INFORMATION CONCERNING SURGE FOLLOWING COMPLETION OF THE ARRANGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .	61
GENERAL PROXY MATTERS – AOC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	63
GENERAL PROXY MATTERS – SURGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	65

APPENDICES
APPENDIX A —	AOC ARRANGEMENT RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	A-1
APPENDIX B-1 -	SURGE ISSUANCE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	B-1-1
APPENDIX B-2 -	SURGE SHARE CONSOLIDATION RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	B-2-2
APPENDIX C —	NOTICE OF APPLICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	C-1
APPENDIX D —	ARRANGEMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	D-1
APPENDIX E —	INTERIM ORDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	E-1
APPENDIX F —	AOC FAIRNESS OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	F-1
APPENDIX G —	INFORMATION CONCERNING AOC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-1
APPENDIX H —	INFORMATION CONCERNING SURGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	H-1
APPENDIX I —	SECTION 191 OF THE BUSINESS CORPORATIONS ACT (ALBERTA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1

ENCLOSURES

Form of Proxy for AOC Shareholders Form of Proxy for Surge Shareholders Letter of Transmittal for AOC Shareholders (printed on yellow paper) Letter of Transmittal for Surge Shareholders (printed on blue paper) Return Envelopes

LETTER TO AOC SHAREHOLDERS

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July 16, 2021

Dear AOC Shareholders:

You are invited to attend a special meeting (the “ AOC Meeting ”) of the holders (“ AOC Shareholders ”) of common shares (the “ AOC Shares ”) of Astra Oil Corp. (“ AOC “) to be held on August 17, 2021 at 8:30 a.m. (Calgary time) at the offices of Burnet, Duckworth & Palmer LLP, located at Suite 2400, 525 – 8[th] Avenue S.W., Calgary, Alberta, for the following purposes:

to consider and, if thought advisable, to approve, with or without amendment, a special resolution (the “ AOC Arrangement Resolution ”) to approve a plan of arrangement involving, inter alia, Surge Energy Inc. (“ Surge ”), AOC and the AOC Shareholders (the “ Arrangement ”) under Section 193 of the Business Corporations Act (Alberta); and
to transact such other business as may properly come before the AOC Meeting or any adjournment or postponement thereof.

Further particulars of the matters referred to above and the full text of the AOC Arrangement Resolution are set forth in the accompanying joint management information circular of Surge and AOC dated July 16, 2021 (the “ Information Circular ”). All capitalized terms used in this letter but not otherwise defined have the meanings set forth in the Information Circular under “ Glossary of Terms ”.

AOC and Surge entered into an arrangement agreement dated as of June 22, 2021 (the “ Arrangement Agreement ”) pursuant to which Surge will acquire, directly or indirectly, all of the issued and outstanding AOC Shares. Pursuant to the Plan of Arrangement, AOC Shareholders (other than Dissenting AOC Shareholders) will receive 3.1746 common shares in the capital of Surge (“ Surge Shares ”) for each AOC Share held (prior to and without assuming the completion of the Surge Share Consolidation). In the event the Surge Share Consolidation is completed, AOC Shareholders (other than Dissenting AOC Shareholders) will receive approximately 0.3735 Surge Shares for each AOC Share (representing approximately 0.1176 Surge Shares for each Surge Share to be issued under the Arrangement). See “ Matters to be Acted Upon at the Surge Meeting – Surge Share Consolidation ” in the Information Circular.

If the Arrangement is completed as contemplated, it is expected that former AOC Shareholders (including former holders of AOC Options and AOC Warrants which are expected to be exercised on a “cashless exercise” basis prior to the effective time of the Arrangement) will own approximately 38% of the outstanding Surge Shares (on an undiluted basis) subsequent to the Arrangement.

National Bank Financial Inc. (“ NBF ”) has acted as financial advisor to AOC and NBF has provided the board of directors of AOC (the “ AOC Board ”) with an opinion that, as of the date of such opinion and based upon and subject to the assumptions, limitations, qualifications and other matters stated in such opinion, the consideration to be received by AOC Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the AOC Shareholders. The fairness opinion of NBF is attached as Appendix F to the Information Circular.

The AOC Board has reviewed the terms of the Arrangement in detail and after considering, among other things: (i) the fairness opinion provided by NBF; (ii) the anticipated benefits of the Arrangement; and (iii) the risks associated with completing the Arrangement, the AOC Board has unanimously determined that the Arrangement is in the best interests of AOC, determined the Arrangement is fair to the AOC Shareholders, approved the Arrangement and the entering into of the Arrangement Agreement and resolved to recommend that the AOC Shareholders vote in favour of the AOC Arrangement Resolution.

The AOC Arrangement Resolution must be approved by not less than 66[2] ⁄3% of the votes cast by the AOC Shareholders, present in person or by proxy at the AOC Meeting. It is a condition to the completion of the Arrangement that the AOC Arrangement Resolution be approved at the AOC Meeting. All of the directors and executive officers of AOC and certain other AOC Shareholders (collectively, the “ AOC Supporting Shareholders ”) have entered into support agreements, collectively representing approximately 70.07% of the issued and outstanding AOC Shares, pursuant to which such AOC Supporting Shareholders have agreed to, among other things, vote in favour of the AOC Arrangement Resolution and otherwise support the transactions contemplated by the Arrangement Agreement.

The AOC Board unanimously recommends that the AOC Shareholders vote FOR the AOC Arrangement Resolution.

The AOC Meeting will be held in person at the offices of Burnet, Duckworth & Palmer LLP, Suite 2400, 525 – 8th Avenue S.W., Calgary, Alberta, on August 17 at 8:30 a.m. (Calgary time). AOC Shareholders may attend the AOC Meeting in person or may be represented by proxy.

It is important that your AOC Shares are represented at the AOC Meeting. If you are unable to attend the AOC Meeting in person we request that you date and sign the enclosed form of proxy and mail it to or deposit it with Computershare Trust Company of Canada, Proxy Dept., 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, by telephone at 1-866-732-VOTE (8683), by facsimile at 1-866-249-7775 or through the internet by using the 15-digit control number located at the bottom of your proxy at www.investorvote.com. In order to be valid and acted upon at the AOC Meeting, forms of proxy must be received at the aforesaid address not later than 8:30 a.m. (Calgary time) on August 13, 2021 or not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to any adjournment or postponement of the AOC Meeting (the “ AOC Proxy Deadline ”). The time limit for the deposit of proxies may be waived or extended by the Chair of the Meeting at his discretion without notice. For information regarding the voting or appointing a proxy by internet, see the form of proxy for AOC Shareholders and the Information Circular under the heading “ General Proxy Matters – AOC – Voting by Internet ”.

Registered AOC Shareholders should also complete and return the enclosed letter of transmittal in accordance with its instructions which, when properly completed and returned together with the certificate(s) representing their AOC Shares and all other required documents, will enable each AOC Shareholder to obtain the Surge Shares that the AOC Shareholder is entitled to receive as consideration under the Arrangement. Assuming completion of the Surge Share Consolidation as set forth in the Information Circular, AOC Shareholders will not be required to take any further action to obtain the Surge Shares that they are entitled to receive pursuant to the Surge Share Consolidation (other than the completion and delivery of the enclosed letter of transmittal for AOC Shareholders in accordance with its instructions).

Beneficial AOC Shareholders (being AOC Shareholders who hold their AOC Shares through a broker, investment dealer, bank, trust company, custodian, nominee or other intermediary) can appoint themselves or a proxyholder to participate at the AOC Meeting. If you are a beneficial AOC Shareholder, please complete the form of proxy or voting instruction form provided to you by your broker or other intermediary in accordance with the instructions provided therein.

The Information Circular contains a detailed description of the Arrangement as well as detailed information regarding AOC and Surge. It also includes certain risk factors relating to the completion of the Arrangement and the potential consequences to an AOC Shareholder exchanging its AOC Shares for Surge Shares in connection with the Arrangement. Please give this material your careful consideration and, if you require assistance, consult your financial, tax or other professional advisors. In the event of a postal disruption as a result of a Canada Post labour disruption or other cause, please see “ General Proxy Matters – AOC – Appointment and Revocation of Proxies ” and “ General Information – Information for Beneficial Shareholders ” in the Information Circular for information on how to obtain and submit a form of proxy.

AOC management and the AOC Board are excited about the growth prospects and potential value creation for AOC Shareholders that the combination with Surge is expected to bring.

On behalf of AOC, we would like to thank you for your continued support as we proceed with this important transaction. We look forward to receiving your support at the AOC Meeting.

Yours truly,

(signed) “ Andrew Greenslade ”

Andrew Greenslade

President and Chief Executive Officer Astra Oil Corp.

LETTER TO SURGE SHAREHOLDERS

July 16, 2021

Dear Surge Shareholders:

You are invited to attend a special meeting (the “ Surge Meeting ”) of the holders (“ Surge Shareholders ”) of common shares (the “ Surge Shares ”) of Surge Energy Inc. (“ Surge ”) to be held on August 17, 2021 at 9:30 a.m. (Calgary time) in a virtual-only format that will be conducted via live webcast accessible at https://web.lumiagm.com/275-179-871, password: surge2021 (case sensitive), for the following purposes:

to consider and, if thought advisable, to approve, with or without amendment, an ordinary resolution (the “ Surge Issuance Resolution ”) approving the issuance of Surge Shares pursuant to a plan of arrangement (the “ Arrangement ”) involving, inter alia, Surge, Astra Oil Corp. (“ AOC ”) and the holders (“ AOC Shareholders ”) of common shares (“ AOC Shares ”) of AOC under Section 193 of the Business Corporations Act (Alberta);
conditional upon the Surge Issuance Resolution being passed at the Surge Meeting, to consider and, if thought advisable, to pass, with or without variation, a special resolution (the “ Surge Share Consolidation Resolution ”) approving the amendment to the articles of Surge to effect a consolidation of the Surge Shares (the “ Surge Share Consolidation ”) on the basis of one (1) post-consolidation Surge Share for each 8.5 pre-consolidation Surge Shares; and
to transact such other business as may properly come before the Surge Meeting or any adjournment or postponement thereof.

While Surge Shareholders and duly appointed proxyholders will not be able to attend the Surge Meeting in person, regardless of geographic location and ownership, they will have an equal opportunity to participate at the Surge Meeting and vote on the matters considered at the Surge Meeting. Detailed instructions about how to participate in the Surge Meeting can be found in the accompanying Information Circular.

Further particulars of the matters referred to above and the full text of each of the Surge Issuance Resolution and the Surge Share Consolidation Resolution are set forth in the accompanying joint management information circular of Surge and AOC dated July 16, 2021 (the “ Information Circular ”). All capitalized terms used in this letter but not otherwise defined have the meanings set forth in the Information Circular under “ Glossary of Terms ”.

AOC and Surge entered into an arrangement agreement dated as of June 22, 2021 (the “ Arrangement Agreement ”) pursuant to which Surge will acquire, directly or indirectly, all of the issued and outstanding AOC Shares. Pursuant to the Plan of Arrangement, AOC Shareholders (other than Dissenting AOC Shareholders) will receive 3.1746 Surge Shares for each AOC Share held (prior to and without assuming the completion of the Surge Share Consolidation, see “ Matters to be Acted Upon at the Surge Meeting – Surge Share Consolidation ” in the Information Circular). If the Arrangement is completed as contemplated, it is expected that former AOC Shareholders (including holders of AOC Options and AOC Warrants which are expected to be exercised on a “cashless exercise” basis prior to the effective time of the Arrangement) will own approximately 38% of the outstanding Surge Shares (on an undiluted basis) subsequent to the Arrangement.

The Surge Board has considered the Arrangement and after considering, among other things, (i) advice from its financial and legal advisors; (ii) the anticipated benefits of the Arrangement; and (iii) the risks associated with completing the Arrangement, the Surge Board has unanimously determined that the Arrangement is in the best interests of Surge, approved the Arrangement and the entering into of the Arrangement Agreement and resolved to recommend that Surge Shareholders vote in favour of the Surge Issuance Resolution.

The issuance of Surge Shares in connection with the Arrangement is subject to the approval of a majority of the Surge Shareholders pursuant to the terms of the Arrangement Agreement and the policies of the Toronto Stock Exchange. Therefore, the Surge Issuance Resolution must be approved by a simple majority of the votes cast by the Surge Shareholders, present in person or represented by proxy at the Surge Meeting. It is a condition to the completion of the Arrangement that the Surge Issuance Resolution be approved at the Surge Meeting.

The Surge Share Consolidation Resolution must be approved by 66[2] ⁄3% of the Surge Shareholders, present in person or represented by proxy at the Surge Meeting. The completion of the Arrangement is not subject to the approval of the Surge Share Consolidation Resolution by the Surge Shareholders.

The Surge Board unanimously recommends that the Surge Shareholders vote FOR the Surge Issuance Resolution and FOR the Surge Share Consolidation Resolution.

It is important that your Surge Shares are represented at the Surge Meeting. If you are unable to attend the Surge Meeting in person we request that you date and sign the enclosed form of proxy and mail it to or deposit it with Odyssey Trust Company (“ Odyssey ”), at 1230 - 300 5[th] Avenue S.W., Calgary, Alberta, T2P 3C4. In order to be valid and acted upon at the Surge Meeting, forms of proxy must be received at the

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aforesaid address not later than 9:30 a.m. (Calgary time) on August 13, 2021 or not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to any adjournment or postponement of the Surge Meeting (the “ Surge Proxy Deadline ”). The time limit for the deposit of proxies may be waived or extended by the Chair of the Surge Meeting at their discretion without notice. For information regarding internet voting or appointing a proxy, see the form of proxy for Surge Shareholders and the Information Circular under the heading “ General Proxy Matters – Surge – Voting by Internet ”.

Registered shareholders and duly appointed proxyholders will be able to virtually attend the Surge Meeting, submit questions and vote in real time, provided they are connected to the internet and follow the instructions in the attached the Information Circular. Non-registered, or beneficial, Surge Shareholders who have not duly appointed themselves as proxyholder will be able to virtually attend the Meeting as guests but will not be able to vote at the Surge Meeting.

Surge Shareholders who wish to appoint a person other than the management nominees identified in the form of proxy or voting instruction form (including a beneficial Surge Shareholder who wishes to appoint themselves to attend the Surge Meeting) must carefully follow the instructions in the Information Circular and on their form of proxy or voting instruction form. These instructions include the additional step of registering such proxyholder with Odyssey by sending an email to [email protected] no later than the Surge Proxy Deadline in order for the proxyholder to receive a control number to attend the Surge Meeting. If you wish to appoint a person other than the management nominees identified on the form of proxy or voting instruction form to attend and participate at the Surge Meeting as your proxy and vote your Surge Shares, you MUST register such proxyholder after having submitted your form of proxy or voting instruction form identifying such proxyholder. Failure to register the proxyholder with Odyssey will result in the proxyholder not receiving a control number to participate in the Surge Meeting and only being able to attend as a guest. Guests will be able to listen to the Surge Meeting but will not be able to vote or ask questions. Please see the section entitled “ Appointment and Revocation of Proxies ” section in the Information Circular for further instructions.

Registered Surge Shareholders should also complete and return the enclosed letter of transmittal in accordance with its instructions which, conditional upon the Surge Issuance Resolution and Surge Share Consolidation Resolution being passed at the Surge Meeting and when properly completed and returned together with the certificate(s) representing their Surge Shares and all other required documents, will enable each Surge Shareholder to obtain the Surge Shares that the Surge Shareholder is entitled to receive pursuant to the Surge Share Consolidation, if completed.

Beneficial Surge Shareholders (being Surge Shareholders who hold their Surge Shares through a broker, investment dealer, bank, trust company, custodian, nominee or other intermediary) can appoint themselves or a proxyholder to participate in the virtual Surge Meeting. If you are a beneficial Surge Shareholder, please complete the form of proxy or voting instruction form provided to you by your broker or other intermediary in accordance with the instructions provided therein.

The Information Circular contains a detailed description of the Arrangement as well as detailed information regarding AOC and Surge. It also includes certain risk factors relating to the completion of the Arrangement. Please give this material your careful consideration. In the event of a postal disruption as a result of a Canada Post labour disruption or other cause, please see “ General Proxy Matters – Surge – Appointment and Revocation of Proxies ” and “ General Information – Information for Beneficial Shareholders ” in the Information Circular for information on how to obtain and submit a form of proxy or voting information form, as applicable.

On behalf of Surge, I would like to thank all Surge Shareholders for their ongoing support as we work towards completion of this exciting transaction. We look forward to receiving your support at the Surge Meeting.

Yours truly,

(signed) “ Paul Colborne ”

Paul Colborne President and Chief Executive Officer Surge Energy Inc.

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF ASTRA OIL CORP.

TO BE HELD ON AUGUST 17, 2021

NOTICE IS HEREBY GIVEN that pursuant to an interim order of the Court of Queen’s Bench of Alberta dated July 15, 2021 (the “ Interim Order ”) a special meeting (the “ AOC Meeting ”) of the holders (“ AOC Shareholders ”) of common shares (“ AOC Shares ”) of Astra Oil Corp. (“ AOC ”) will be held on August 17, 2021 at 8:30 a.m. (Calgary time), at the offices of Burnet, Duckworth & Palmer LLP, located at Suite 2400, 525 – 8[th] Avenue S.W., Calgary, Alberta, for the following purposes:

to consider, pursuant to the Interim Order, and, if thought advisable, to approve, with or without amendment, a special resolution (the “ AOC Arrangement Resolution ”), the full text of which is set forth in Appendix A to the accompanying joint management information circular of AOC and Surge Energy Inc. (“ Surge ”) dated July 16, 2021 (the “ Information Circular ”), approving a plan of arrangement involving, inter alia, Surge, AOC and the AOC Shareholders (the “ Arrangement ”) under Section 193 of the Business Corporations Act (Alberta) (the “ ABCA ”), all as more particularly described below and in the Information Circular; and
to transact such other business as may properly come before the AOC Meeting or any adjournment or postponement thereof.

The completion of the Arrangement is conditional upon, among other matters, the receipt of all regulatory and court approvals.

Specific details of the matters to be put before the AOC Meeting are set forth in the Information Circular.

The record date (the “ AOC Record Date ”) for the determination of AOC Shareholders entitled to receive notice of, and to vote at, the AOC Meeting is July 13, 2021. Only AOC Shareholders whose names have been entered in the register of AOC Shareholders at the close of business on the AOC Record Date will be entitled to receive notice of and to vote at the AOC Meeting. To the extent an AOC Shareholder transfers the ownership of any of its AOC Shares after the AOC Record Date and the transferee of those AOC Shares establishes that it owns such AOC Shares and requests, at least 10 days before the AOC Meeting, to be included in the list of AOC Shareholders eligible to vote at the AOC Meeting, such transferee will be entitled to vote those AOC Shares at the AOC Meeting.

Registered AOC Shareholders may attend the AOC Meeting in person or may be represented by proxy. AOC Shareholders who are unable to attend the AOC Meeting or any adjournments or postponements thereof in person are requested to date, sign and return the enclosed form of proxy for use at the AOC Meeting or any adjournment or postponement thereof. To be effective, the enclosed form of proxy must be dated, signed and deposited with AOC’s registrar and transfer agent, Computershare Trust Company of Canada: (i) by mail using the enclosed return envelope or one addressed to Computershare Trust Company of Canada, 8th Floor North Tower, 100 University Avenue, Toronto, Ontario, M5J 2Y1; (ii) by telephone at 1-866-732-VOTE (8683); (iii) by facsimile at 1-866-249-7775; or (iv) through the internet at www.investorvote.com, no later than 8:30 a.m. (Calgary time) on August 13, 2021 or, if the AOC Meeting is adjourned or postponed, no later than 48 hours (excluding Saturdays, Sundays and statutory holidays in Alberta) before the beginning of any adjourned or postponed AOC Meeting. The time limit for the deposit of proxies may be waived or extended by the Chair of the AOC Meeting at his discretion without notice. To vote through the internet you will require your control number found on your proxy form.

For information regarding voting or appointing a proxy by internet, see the form of proxy for AOC Shareholders and/or the section entitled “ General Proxy Matters – AOC – Voting by Internet ” in the Information Circular. In the event of a postal disruption as a result of a Canada Post labour disruption or other cause, please see “ General Proxy Matters – AOC – Appointment and Revocation of Proxies ” and “ General Information – Information for Beneficial Shareholders ” in the Information Circular for information on how to obtain and submit a form of proxy or voting information form, as applicable and a letter of transmittal.

Pursuant to the Interim Order, registered AOC Shareholders have a right to dissent in respect of the AOC Arrangement Resolution and to be paid an amount equal to the fair value of their AOC Shares. This dissent right and the dissent procedures are described in the Information Circular. The dissent procedures require that a registered AOC Shareholder who wishes to dissent send a written notice of objection to the AOC Arrangement Resolution to AOC, c/o Burnet, Duckworth & Palmer LLP, Suite 2400, 525 – 8[th] Avenue S.W., Calgary, Alberta, T2P 1G1, Attention: Ryan Algar, to be received by no later than 8:30 a.m. (Calgary time) on the second business day immediately preceding the date of the AOC Meeting, and must otherwise strictly comply with the dissent procedures described in the Information Circular and Section 191 of the ABCA and the Interim Order, which are set forth in Appendices E and K, respectively to the Information Circular. Failure to strictly comply with the dissent procedures may result in the loss of the right to dissent.

Beneficial owners of AOC Shares must be aware that only registered AOC Shareholders are entitled to dissent. Accordingly, a beneficial owner of AOC Shares must make arrangements for the AOC Shares beneficially owned by such AOC Shareholder to be registered in the AOC Shareholder’s name prior to the time the written objection to the AOC Arrangement Resolution is required to be received by AOC, or alternatively, make arrangements for the registered holder of such AOC Shares to dissent on the AOC Shareholder’s behalf. See the section entitled “ The Arrangement – AOC Dissent Rights ” in the Information Circular.

The form of proxy confers discretionary authority with respect to: (i) amendments or variations to the matters of business to be considered at the AOC Meeting; and (ii) other matters that may properly come before the AOC Meeting. As of the date hereof, management of AOC knows of no

amendments, variations or other matters to come before the AOC Meeting other than the matters set forth in this Notice of Special Meeting. AOC Shareholders who are planning on returning the accompanying form of proxy are encouraged to review the Information Circular carefully before submitting the proxy form.

Dated at the City of Calgary, in the Province of Alberta, this 16[th] day of July, 2021.

BY ORDER OF THE BOARD OF DIRECTORS OF ASRA OIL CORP.

(signed) “ Andrew Greenslade ”

Andrew Greenslade President and Chief Executive Officer Astra Oil Corp.

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF SURGE ENERGY INC.

TO BE HELD ON AUGUST 17, 2021

NOTICE IS HEREBY GIVEN that a special meeting (the “ Surge Meeting ”) of the holders (“ Surge Shareholders ”) of common shares (“ Surge Shares ”) of Surge Energy Inc. (“ Surge ”) will be held on August 17, 2021 at 9:30 a.m. (Calgary time) in a virtual-only format that will be conducted via live webcast accessible at https://web.lumiagm.com/275-179-871, password: surge2021 (case sensitive), for the following purposes:

to consider and, if thought advisable, to approve, with or without amendment, an ordinary resolution (the “ Surge Issuance Resolution ”), the full text of which is set forth in Appendix B-1 to the accompanying joint management information circular of Surge and Astra Oil Corp. (“ AOC ”) dated July 16, 2021 (the “ Information Circular ”), approving the issuance of Surge Shares pursuant to a plan of arrangement (the “ Arrangement ”) involving, inter alia, AOC, Surge, and the holders of common shares of AOC under Section 193 of the Business Corporations Act (Alberta), all as more particularly described below and in the Information Circular;
conditional upon the Surge Issuance Resolution being approved at the Surge Meeting, to consider and, if thought advisable, to approve, with or without amendment, a special resolution (the “ Surge Share Consolidation Resolution ”), the full text of which is set forth into Appendix B-2 the Information Circular approving an amendment to the articles of Surge to effect a consolidation of the outstanding Surge Shares on the basis of a one (1) post-consolidation Surge Share for each 8.5 pre-consolidation Surge Shares, all as more particularly described below and in the Information Circular; and
to transact such other business as may properly come before the Surge Meeting or any adjournment or postponement thereof.

The completion of the Arrangement is conditional upon, among other matters, the receipt of all regulatory and court approvals.

Specific details of the matters to be put before the Surge Meeting are set forth in the Information Circular.

The record date (the “ Surge Record Date ”) for the determination of Surge Shareholders entitled to receive notice of, and to vote at, the Surge Meeting is July 15, 2021. Only Surge Shareholders whose names have been entered in the register of Surge Shareholders at the close of business on the Surge Record Date will be entitled to receive notice of and to vote at the Surge Meeting. To the extent a Surge Shareholder transfers the ownership of any of its Surge Shares after the Surge Record Date and the transferee of those Surge Shares establishes that it owns such Surge Shares and requests, at least 10 days before the Surge Meeting, to be included in the list of Surge Shareholders eligible to vote at the Surge Meeting, such transferee will be entitled to vote those Surge Shares at the Surge Meeting.

Registered Surge Shareholders may attend the Surge Meeting virtually or may be represented by proxy. Surge Shareholders who are unable to attend the Surge Meeting or any adjournments or postponements thereof in person are requested to date, sign and return the accompanying form of proxy for use at the Surge Meeting or any adjournment or postponement thereof.

To be effective, the proxy must be mailed so as to be deposited at the office of Surge’s transfer agent, Odyssey Trust Company, 1230-300 5th Avenue S.W., Calgary, AB, T2P 3C4, before 9:30 a.m. (Calgary time) on August 13, 2021 or, if the Surge Meeting is adjourned or postponed, at least 48 hours prior to the time of the adjourned or postponed Surge Meeting. The time limit for the deposit of proxies may be waived or extended by the Chair of the Surge Meeting at his discretion without notice. To vote through the internet instead, you will require your control number found on your proxy form.

Registered shareholders and duly appointed proxyholders will be able to virtually attend the Surge Meeting, submit questions and vote in real time, provided they are connected to the internet and follow the instructions in the attached the Information Circular. Non-registered, or beneficial, Surge Shareholders who have not duly appointed themselves as proxyholder will be able to virtually attend the Surge Meeting as guests but will not be able to vote at the Surge Meeting.

Shareholders who wish to appoint a person other than the management nominees identified in the form of proxy or voting instruction form (including a beneficial Surge Shareholder who wishes to appoint themselves to attend the Surge Meeting) must carefully follow the instructions in the Information Circular and on their form of proxy or voting instruction form. These instructions include the additional step of registering such proxyholder with Odyssey by sending an email to [email protected] no later than the Surge Proxy Deadline in order for the proxyholder to receive a control number to attend the Surge Meeting. If you wish to appoint a person other than the management nominees identified on the form of proxy or voting instruction form to attend and participate at the Surge Meeting as your proxy and vote your Surge Shares, you MUST register such proxyholder after having submitted your form of proxy or voting instruction form identifying such proxyholder. Failure to register the proxyholder with Odyssey will result in the proxyholder not receiving a control number to participate in the Surge Meeting and only being able to attend as a guest. Guests will be able to listen to the Surge Meeting but will not be able to vote or ask questions. Please see the section entitled “ Appointment and Revocation of Proxies ” section in the Information Circular for further instructions.

For information regarding voting or appointing a proxy by internet, see the form of proxy for Surge Shareholders and/or the section entitled “ General Proxy Matters – Surge – Voting by Internet ” in the Information Circular. In the event of a postal disruption as a result of a Canada

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Post labour disruption or other cause, please see “ General Proxy Matters – Surge – Appointment and Revocation of Proxies ” and “ General Information – Information for Beneficial Shareholders ” in the Information Circular for information on how to obtain and submit a form of proxy or voting information form, as applicable.

The form of proxy confers discretionary authority with respect to: (i) amendments or variations to the matters of business to be considered at the Surge Meeting; and (ii) other matters that may properly come before the Surge Meeting. As of the date hereof, management of Surge knows of no amendments, variations or other matters to come before the Surge Meeting other than the matters set forth in this Notice of Meeting. Surge Shareholders who are planning on returning the accompanying form of proxy are encouraged to review the Information Circular carefully before submitting the proxy form.

If you have any questions or need any additional information, you should contact your professional advisors or you can contact Shorecrest Group, Surge’s proxy solicitation agent, toll-free at 1 (888) 637-5789, locally at (647) 931-7454 or by email at [email protected].

Dated at the City of Calgary, in the Province of Alberta, this 16[th] day of July, 2021.

BY ORDER OF THE BOARD OF DIRECTORS OF SURGE ENERGY INC.

(signed) “ Paul Colborne ”

Paul Colborne President and Chief Executive Officer Surge Energy Inc.

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JOINT MANAGEMENT INFORMATION CIRCULAR

GENERAL INFORMATION

Introduction

This Information Circular is furnished in connection with the solicitation of proxies by and on behalf of the management of AOC and Surge for use at the AOC Meeting and the Surge Meeting, respectively, and any adjournment(s) or postponement(s) thereof. No person has been authorized to give any information or make any representation in connection with the Arrangement or any other matters to be considered at the AOC Meeting or the Surge Meeting other than those contained in this Information Circular (or incorporated by reference herein) and, if given or made, any such information or representation must not be relied upon as having been authorized.

All summaries of, and references to, the Arrangement Agreement, the Arrangement and the AOC Fairness Opinion in this Information Circular are qualified in their entirety by reference to the complete text of the Arrangement Agreement, the Plan of Arrangement and the AOC Fairness Opinion, as applicable, which are attached as Appendix D, Exhibit “A” to Appendix D, and Appendix F, respectively, to this Information Circular. You are urged to carefully read the full text of the Arrangement Agreement, the Plan of Arrangement and the AOC Fairness Opinion.

Information Contained in this Information Circular

The information contained in this Information Circular is given as at July 16, 2021 except where otherwise noted, and information contained in documents incorporated by reference herein is given as of the dates noted in those documents.

This Information Circular does not constitute an offer to buy, or a solicitation of an offer to sell, any securities, or the solicitation of a proxy, by any person in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such an offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such an offer or solicitation.

The information concerning AOC and its affiliates contained in this Information Circular has been provided by AOC for inclusion in this Information Circular. Although Surge has no knowledge that any statements contained herein taken from or based on such information provided by AOC are untrue or incomplete, Surge assumes no responsibility for the accuracy of such information.

The information concerning Surge and its affiliates contained in this Information Circular has been provided by Surge for inclusion in this Information Circular. Although AOC has no knowledge that any statements contained herein taken from or based on such information provided by Surge are untrue or incomplete, AOC assumes no responsibility for the accuracy of such information.

Information contained in or otherwise accessed through AOC’s or Surge’s website, or any website, other than those documents incorporated by reference herein and filed on SEDAR, does not constitute part of this Information Circular.

AOC Shareholders and Surge Shareholders should not construe the contents of this Information Circular as legal, tax or financial advice and should consult with their own professional advisors in considering the relevant legal, tax, financial or other matters contained in this Information Circular.

If you hold AOC Shares or Surge Shares through a broker, investment dealer, bank, trust company, nominee or other intermediary (collectively, an “ Intermediary ”), you should contact your Intermediary for instructions and assistance in voting your AOC Shares and Surge Shares, as applicable, and surrendering your AOC Shares, if any, that you beneficially own.

Information concerning the Surge Shares issuable pursuant to the Arrangement does not assume the completion of the Surge Share Consolidation. See “ Matters to be Acted Upon at the Surge Meeting – Surge Share Consolidation ” for more information concerning the Surge Share Consolidation.

Cautionary Notice Regarding Forward-Looking Statements and Information

This Information Circular, including documents incorporated by reference herein, contains forward-looking statements and information (collectively “ forward-looking information ”). The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “objective”, “ongoing”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends”, “potential”, and similar expressions are intended to identify forward-looking information. Forward-looking information presented in such statements or disclosures may, among other things, relate to: (i) the anticipated benefits from the Arrangement; (ii) the expected completion and implementation date of the Arrangement; (iii) the expected date, time and venue of the Meetings; (iii) certain combined operational, financial, production and reserve information; (iv) the nature of Surge’s operations following the Arrangement; (v) sources of income; (vi) forecasts of capital expenditures, including general and administrative expenses and savings; (vii) expectations regarding the ability to raise capital; (viii) fluctuations in currency exchange rates; (ix) anticipated income taxes; (x) Surge’s business and financial outlook following the Arrangement; (xi) plans and objectives of management for future operations; (xii) forecast production rates and reserve estimates; (xiii) anticipated operational and financial performance; (xiv) the composition of the Surge Board subsequent to the Arrangement; (xv) anticipated tax treatment; (xvi) transfer restrictions (or lack thereof) on Surge Shares;

(xvii) treatment of AOC Options and AOC Warrants; (xiii) the expected effect of the Arrangement on Surge’s share capital; (xix) the expected debt financing arrangements to be available to Surge following completion of the Arrangement; (xx) the availability and effect of Tax Pools for Surge subsequent to the Arrangement; and (xxi) the timing of the Surge Share Consolidation.

Various assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. Those assumptions and factors are based on information currently available to AOC and Surge, including information obtained from third-party industry analysts and other third-party sources. In some instances, material assumptions and factors are presented or discussed elsewhere in this Information Circular in connection with the statements or disclosure containing the forward-looking information. You are cautioned that the following list of material factors and assumptions is not exhaustive. The factors and assumptions include, but are not limited to:

the approval of the Arrangement by the Court;
the structure, steps, timing and effect of the Arrangement;
the timing of the Meetings and the Final Order;
the approval of the AOC Arrangement Resolution by the AOC Shareholders;
the approval of the Surge Issuance Resolution and the Surge Share Consolidation Resolution by the Surge Shareholders;
the receipt of all required regulatory and third-party approvals to complete the Arrangement, including the Competition Act Approval, the approval of the TSX and of Surge’s lenders pursuant to the Surge Credit Facilities;
the satisfaction or waiver of all conditions to the completion of the Arrangement in accordance with the terms of the Arrangement Agreement;
the completion of the Arrangement and the anticipated Effective Date;
the anticipated benefits of the Arrangement;
the expected number of AOC Options and AOC Warrants to be exercised or surrendered;
the effect of the Arrangement on AOC and Surge;
the effect and timing of the Surge Share Consolidation, if completed;
the ability of AOC and Surge to achieve drilling success consistent with management’s expectations;
quantity and other characteristics of the existing reserves of AOC and Surge;
no material changes in the legislative and operating framework for the business of AOC and Surge, as applicable;
no material adverse changes in the business of either or both of AOC and Surge;
the ability of Surge to access credit subsequent to the Arrangement, including with respect to the Surge Credit Facilities; and
no significant event occurring outside the ordinary course of business of AOC or Surge, as applicable, such as a natural disaster or other calamity.

The forward-looking information in statements or disclosures in this Information Circular (including the documents incorporated by reference herein) is based (in whole or in part) upon factors which may cause actual results, performance or achievements of AOC or Surge, as applicable, to differ materially from those contemplated (whether expressly or by implication) in the forward-looking information. Those factors are based on information currently available to AOC and Surge including information obtained from third-party industry analysts and other third party sources. Actual results or outcomes may differ materially from those predicted by such statements or disclosures. While neither AOC nor Surge know the impact any of those differences may have, their business, results of operations, financial condition and credit stability may be materially adversely affected.

The reader is further cautioned that the preparation of financial statements in accordance with GAAP requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates may change, having either a negative or positive effect on net earnings as further information becomes available, and as the economic environment changes.

Readers are cautioned that the foregoing lists are not exhaustive. Readers should carefully review and consider the risk factors described under “ Risk Factors – Risk Factors Related to the Arrangement ”, “ Certain Canadian Federal Income Tax Considerations ” and other risks described elsewhere in this Information Circular, the Appendices hereto and in the documents incorporated by reference herein. Additional information on these and other factors that could affect the operations or financial results of Surge are included in documents, including the Surge AIF, on file with applicable Canadian Securities Administrators that may be accessed on Surge’s issuer profile through the System for Electronic Document Analysis and Retrieval (SEDAR) website (www.sedar.com) and at Surge’s website (www.surgeenergy.ca). Such documents, unless expressly incorporated by reference herein, and websites, although referenced, do not form part of this Information Circular.

The forward-looking information contained in this Information Circular (including the documents incorporated by reference herein) is made as of the date hereof and thereof, as applicable, and AOC and Surge undertake no obligation to update publicly or revise any forward-looking

information, whether as a result of new information, future events or otherwise, except as required by Applicable Securities Laws. Because of the risks, uncertainties and assumptions contained herein and in the documents incorporated by reference herein, Securityholders should not place undue reliance on forward looking information. The forward-looking information contained herein are expressly qualified in their entirety by this cautionary statement.

Information for Beneficial Shareholders

The information set forth in this section is of significant importance to many Securityholders, as a substantial number of Securityholders do not hold Securities in their own name. Beneficial Securityholders should note that only those Securityholders whose name appears on the register of the registrar and transfer agent for AOC or Surge, as applicable, as the registered holders of Securities (“ Registered Holders ”) or duly appointed proxyholders are recognized and permitted to vote at the AOC Meeting or Surge Meeting, as applicable. Many Securityholders are “non-registered” shareholders because the Securities they own are not registered in their names but are instead registered in the name of an Intermediary through which they hold their Securities. More particularly, a person is not a Registered Holder in respect of Securities which are held on behalf of that person (the “ Beneficial Shareholder ”) but which are registered either: (a) in the name of an Intermediary that the Beneficial Shareholder deals with in respect of the Securities (Intermediaries include, among others, banks, trust companies, securities dealers or brokers and trustees or administrators of self-administered registered retirement savings plans, registered retirement income funds, registered education savings plans or tax free savings accounts and similar plans); or (b) in the name of a clearing agency (such as CDS or Cede & Co.) of which the Intermediary is a participant. In Canada, the vast majority of such shares are registered under the name of CDS, which company acts as nominee for many Canadian brokerage firms. Securities so held by Intermediaries can only be voted (for or against resolutions) upon the instructions of the Beneficial Shareholder. Without specific instructions, Intermediaries are prohibited from voting Securities held for Beneficial Shareholders. Therefore, Beneficial Shareholders should ensure that instructions respecting the voting of their Securities are communicated to the appropriate person or that the Securities are duly registered in their name.

Applicable regulatory policy requires Intermediaries to seek voting instructions from Beneficial Shareholders in advance of shareholder meetings. Every Intermediary has its own mailing procedures and provides its own return instructions, which should be carefully followed by Beneficial Shareholders in order to ensure that their Securities are voted at the AOC Meeting or Surge Meeting, as applicable. Often, the voting instruction form supplied to a Beneficial Shareholder by its Intermediary is identical to the form of proxy provided to Registered Holders; however, its purpose is limited to instructing the registered shareholder how to vote on behalf of the Beneficial Shareholder. The majority of Intermediaries now delegate responsibility for obtaining instructions from clients to Broadridge Financial Solutions, Inc. (“ Broadridge ”). Broadridge typically mails its voting instruction form (a “ Voting Instruction Form ”), which may be scanned, in lieu of the form of proxy. The Beneficial Shareholders will be requested to complete and return the Voting Instruction Form to Broadridge by mail or facsimile. Alternatively, Beneficial Shareholders can call a toll-free telephone number or access the internet to vote the Securities held by the Beneficial Shareholder. The toll-free number and website will be provided by Broadridge on its Voting Instruction Form. Broadridge then tabulates the results of all instructions received and provides appropriate instructions respecting the voting of Securities to be represented at the AOC Meeting or Surge Meeting, as applicable. A Beneficial Shareholder receiving a Voting Instruction Form from Broadridge cannot use that Voting Instruction Form to vote Securities directly at the applicable Meeting, as the Voting Instruction Form must be returned as directed by Broadridge in advance of the applicable Meeting in order to have the Securities voted.

In accordance with Applicable Securities Laws, AOC and Surge will have distributed copies of the notices of meetings and the Information Circular (the “ Meeting Materials ”) to the Intermediaries for distribution to applicable Beneficial Shareholders. Intermediaries are required to forward the Meeting Materials to Beneficial Shareholders unless a Beneficial Shareholder has waived the right to receive them. Intermediaries often use service companies to forward the Meeting Materials to Beneficial Shareholders. AOC and Surge will not send proxy-related materials directly to non-objecting or objecting Beneficial Shareholders; however, such materials will be delivered to Beneficial Shareholders by Broadridge or through the Beneficial Shareholder’s Intermediary. Surge will pay the reasonable fees and costs of Broadridge or a Beneficial Shareholder’s Intermediary to deliver the proxy-related materials and Form 54-101F7 – Request for Voting Instructions Made by Intermediary to objecting Beneficial Shareholders.

If you are a Beneficial Shareholder and wish to vote at the AOC Meeting or Surge Meeting, you must insert your own name in the space provided on the Voting Instruction Form sent to you by your Intermediary and follow all of the applicable instructions provided by your Intermediary. By doing so, you are instructing your Intermediary to appoint you as proxyholder. It is important that you comply with the signature and return instructions provided by your Intermediary. Please also see further instructions on accessing and voting at the applicable Meetings under the heading “ General Proxy Matters – AOC – How to Participate at the AOC Meeting ” and “ General Proxy Matters – Surge – How to Participate at the Surge Meeting ”.

AOC Shareholders who do not hold their AOC Shares in their own name should also instruct their broker or other Intermediary to complete the AOC Letter of Transmittal regarding the Arrangement with respect to such holder’s AOC Shares in order to receive the Consideration issuable pursuant to the Arrangement. Assuming completion of the Surge Share Consolidation as set forth in this Information Circular, AOC Shareholders will not be required to take any further action to obtain the Surge Shares that they are entitled to receive pursuant to the Surge Share Consolidation (other than the completion and delivery of the AOC Letter of Transmittal in accordance with the instructions set forth therein).

Surge Shareholders who do not hold their Surge Shares in their own name should also instruct their broker or other Intermediary to complete the Surge Letter of Transmittal regarding the Surge Share Consolidation with respect to such holder’s Surge Shares in order to receive their postconsolidation Surge Shares in exchange for their pre-consolidation Surge Shares, if the Surge Share Consolidation is completed.

Beneficial Shareholders who do not receive physical delivery of their Voting Instruction Form and control number by mail due to a postal disruption as a result of a Canada Post labour disruption or other cause may obtain their control number by contacting their broker, financial institution, nominee or other Intermediary that holds their AOC Shares or Surge Shares, as applicable. Upon obtaining their control number, Beneficial Shareholders may proceed to vote their AOC Shares or Surge Shares, as applicable, by accessing the Broadridge internet or telephone voting system as follows, if applicable:

Internet Voting

www.proxyvote.com

Telephone Voting

The Voting Instruction Form will indicate the current number to dial for telephone voting

or providing directions to their broker, financial institution, nominee or other Intermediary to vote on their behalf in accordance with the instructions provided by such Intermediary.

The form of Broadridge Voting Instruction Form for the Surge Meeting, which has also been filed on the internet under Surge’s profile at www.sedar.com, contains more detailed instructions regarding the process for voting through the Broadridge internet and telephone system. We encourage Beneficial Shareholders to review such instructions carefully and contact their broker, nominee or other Intermediary promptly to obtain their required control number or provide instructions to vote on their behalf and thereby ensure their vote is recorded through the internet and telephone system.

Information for United States Shareholders

The solicitation of proxies for the AOC Meeting and the Surge Meeting is not subject to the requirements of Section 14(a) of the U.S. Exchange Act. Accordingly, the solicitations and transactions contemplated in this Information Circular are made in the United States for securities of a Canadian issuer in accordance with Canadian corporate laws and Canadian securities laws, and this Information Circular has been prepared solely in accordance with disclosure requirements applicable in Canada. AOC Shareholders in the United States should be aware that such requirements are different from those of the United States applicable to registration statements under the U.S. Securities Act and proxy statements under the U.S. Exchange Act. Therefore, information concerning assets and operations of Surge and AOC contained herein has been prepared in accordance with Canadian standards and is not comparable in all respects to similar information for United States companies.

In particular, and without limiting the foregoing, information included in or incorporated by reference into this Information Circular regarding oil and gas operations and properties and estimates of oil and gas reserves has been prepared in accordance with Canadian disclosure standards, which differ in certain respects from the disclosure standards applicable to information included in reports and other materials filed with the United States Securities and Exchange Commission (the “ SEC ”) by issuers subject to SEC reporting and disclosure requirements. The SEC generally permits United States reporting oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves and production, net of royalties and interest of others. The SEC generally does not permit reporting companies to disclose net present value of future net revenue from reserves based on forecast prices and costs. The SEC does not permit disclosure of oil and gas resources. Canadian securities laws permit, among other things, the presentation of certain categories of resources and the disclosure of production on a gross basis before deducting royalties. Unless noted otherwise, all disclosures of reserves in this Information Circular and the documents incorporated by reference herein are made on a gross basis using forecast price and cost assumptions.

The financial statements of Surge and AOC and other financial information included or incorporated by reference in this Information Circular have been prepared in Canadian dollars. The financial statements of Surge and other financial information included or incorporated by reference in this Information Circular have been prepared in accordance with GAAP, and, in the case of the audited financial statements, are subject to Canadian auditing and auditor independence standards, which differ from United States generally accepted accounting principles and United States auditing and auditor independence standards in certain material respects, and thus are not directly comparable to financial statements of companies prepared in accordance with United States generally accepted accounting principles and that are subject to United States auditing and auditor independence standards.

The Surge Shares to be received by current AOC Shareholders upon completion of the Arrangement (and the post-amalgamation Surge Shares deemed, for purposes of the U.S. Securities Act, to be received by holders of pre-amalgamation Surge Shares upon completion of the Arrangement) may be resold without restriction under the U.S. Securities Act, except by persons who are “affiliates” of Surge after the Effective Date or who have been affiliates of Surge or AOC within 90 days before the Effective Date. See “ The Arrangement – Securities Law Matters – United States ”.

The enforcement by investors of civil liabilities under United States federal and state securities laws may be affected adversely by the fact that AOC and Surge are (or will be) existing under the laws of the Province of Alberta, Canada, that all of the officers and most of the directors of AOC and Surge are and will be residents of countries other than the United States, that most or all of the experts named in this Information Circular are residents of countries other than the United States, and that most of the assets of AOC and Surge are and will be located outside the United States. You may not be able to sue a corporation organized under the ABCA in a Canadian court for violations of United States securities laws and it may be difficult to compel the forgoing persons to subject themselves to a judgment by a United States court.

AOC Shareholders should be aware that the receipt of Surge Shares as described herein, and the holding and disposition of such shares, may have tax consequences in both the United States and Canada. The United States tax consequences for AOC Shareholders who are resident in, or citizens of, the United States are not described herein. All AOC Shareholders should seek their own tax advice with respect to the tax consequences to them under the laws of any relevant domestic or foreign, state, local or other taxing jurisdiction of the transactions contemplated by the Arrangement in light of their particular situation. For a description of certain Canadian tax consequences applicable to AOC Shareholders who are non-residents of Canada, see “ Certain Canadian Federal Income Tax Considerations ”.

THE SECURITIES ISSUABLE PURSUANT TO THE ARRANGEMENT HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR THE SECURITIES REGULATORY AUTHORITY OF ANY STATE OF THE UNITED STATES, NOR HAS THE SEC OR ANY SUCH STATE SECURITIES REGULATORY AUTHORITY PASSED ON THE ADEQUACY OR ACCURACY OF THIS INFORMATION CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.

Conventions

In this Information Circular, words importing the singular include the plural and vice versa.

In this Information Circular, unless otherwise specified or the context otherwise requires, all dollar amounts are expressed in Canadian dollars and references to “dollars” or “$” are to Canadian dollars and references to “US$” are to United States dollars.

Non-GAAP Financial Measures

Certain of Surge’s documents incorporated by reference in this Information Circular use and refer to financial measures commonly used in the oil and gas industry, which do not have any standardized meaning prescribed by GAAP. Please refer to the non-GAAP measures advisories in such documents for the definitions and descriptions of such terms.

NOTES ON RESERVES DATA AND OTHER OIL AND GAS INFORMATION

All oil and natural gas reserve information contained or incorporated by reference in this Information Circular has been prepared and presented in accordance with NI 51-101.

Abbreviations

Oil and Natural Gas Liquids Bbl barrel Bbls barrels Mbbls thousand barrels MMbbls million barrels Mstb thousand stock tank barrels Bbls/d barrels per day BOPD barrels of oil per day NGLs natural gas liquids STB stock tank barrels	Natural Gas Mcf thousand cubic feet MMcf million cubic feet Mcf/d thousand cubic feet per day MMcf/d million cubic feet per day Mmbtu million British Thermal Units Bcf billion cubic feet GJ Gigajoule

Other

API	American Petroleum Institute
° API	an indication of the specific gravity of crude oil measured on the API gravity scale. Liquid petroleum with a specified
	gravity of 28° API is generally referred to as light crude oil
Boe	barrel of oil equivalent of natural gas and crude oil on the basis of 1 Boe for 6 Mcf of natural gas (this conversion factor is
	an industry accepted norm and is not based on either energy content or current prices)
Boe/d	barrel of oil equivalent per day
m3	cubic metres
MBoe	thousand barrels of oil equivalent
$M or $000s	thousands of dollars
MM	Million
WTI	West Texas Intermediate, the reference price paid in United States dollars at Cushing, Oklahoma for crude oil of standard
	grade

Where any disclosure of reserves data is made in this Information Circular or the documents incorporated by reference herein does not reflect all reserves of Surge or AOC, as applicable, the reader should note that the estimates of reserves and future net revenue for individual properties or groups of properties may not reflect the same confidence level as estimates of the reserves and future net revenue for all properties, due to the effects of aggregation.

Conversions

To Convert From To Mcf Cubic metres Cubic metres Cubic feet Bbls Cubic metres Cubic metres Bbls Feet Metres Metres Feet Miles Kilometres Kilometres Miles Acres Hectares Hectares Acres	Multiply By
	28.174 35.494 0.159 6.290 0.305 3.281 1.609 0.621 0.405 2.471

Caution Respecting Reserves Information

The determination of oil and natural gas reserves involves the preparation of estimates that have an inherent degree of associated uncertainty. Categories of proved and probable reserves have been established to reflect the level of these uncertainties and to provide an indication of the probability of recovery. The estimation and classification of reserves requires the application of professional judgment combined with geological and engineering knowledge to assess whether or not specific reserves classification criteria have been satisfied. Knowledge of concepts including uncertainty and risk, probability and statistics, and deterministic and probabilistic estimation methods is required to properly use and apply reserves definitions.

The recovery and reserve estimates of oil, NGL and natural gas reserves provided herein are estimates only. Actual reserves may be greater than or less than the estimates provided herein. The estimated future net revenue from the production of the disclosed oil and natural gas reserves does not represent the fair market value of these reserves.

Caution Respecting Boe

In this Information Circular, the abbreviation Boe means a barrel of oil equivalent on the basis of 1 Boe to 6 Mcf of natural gas when converting natural gas to Boes. Boes may be misleading, particularly if used in isolation. A Boe conversion ratio of 6 Mcf to 1 Boe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Additionally, given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion ratio at 6:1 may be misleading.

Definitions

Certain terms used in this Information Circular and in the documents incorporated by reference herein describing reserves and other oil and natural gas information are defined below. Certain other terms and abbreviations used in this Information Circular, but not defined or described, are defined in NI 51-101 or the Canadian Oil and Gas Evaluation Handbook maintained by the Society of Petroleum Evaluation Engineers (Calgary Chapter), as amended from time to time (the “ COGE Handbook ”) and, unless the context otherwise requires, shall have the same meanings herein as in NI 51-101 or the COGE Handbook.

Reserves

Reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, from a given date forward, based on: (a) analysis of drilling, geological, geophysical and engineering data; (b) the use of established technology; and (c) specified economic conditions, specifically the forecast prices and costs, which are generally accepted as being reasonable and shall be disclosed. Reserves are classified according to the degree of certainty associated with the estimates as follows:

“ proved reserves ” are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.

“ probable reserves ” are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.

The qualitative certainty levels referred to in the definitions above are applicable to “ individual reserves entities ” (which refers to the lowest level at which reserves calculations are performed) and to “ reported reserves ” (which refers to the highest-level sum of individual entity estimates for which reserves estimates are presented). Reported reserves should target the following levels of certainty under a specific set of economic conditions:

at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimated proved reserves; and
at least a 50 percent probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable reserves.

A qualitative measure of the certainty levels pertaining to estimates prepared for the various reserves categories is desirable to provide a clearer understanding of the associated risks and uncertainties. However, the majority of reserves estimates will be prepared using deterministic methods that do not provide a mathematically derived quantitative measure of probability. In principle, there should be no difference between estimates prepared using probabilistic or deterministic methods.

Each of the reserves categories (proved and probable) may be divided into developed and undeveloped categories as follows:

“ developed reserves ” are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (for example, when compared to the cost of drilling a well) to put the reserves on production. The developed category may be subdivided into producing and non-producing as follows:

“ developed producing reserves ” are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty; and
“ developed non-producing reserves ” are those reserves that either have not been on production, or have previously been on production, but are shut in, and the date of resumption of production is unknown; and

“ undeveloped reserves ” are those reserves expected to be recovered from known accumulations where a significant expenditure (for example, when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable) to which they are assigned.

In multi-well pools it may be appropriate to allocate total pool reserves between the developed and undeveloped categories or to subdivide the developed reserves for the pool between developed producing and developed non-producing. This allocation should be based on the estimator’s assessment as to the reserves that will be recovered from specific wells, facilities and completion intervals in the pool and their respective development and production status.

Interests in Reserves, Production, Wells and Properties

“ gross ” means: (i) in relation to an issuer’s interest in production or reserves, its “company gross reserves”, which are its working interest (operating or non-operating) share before deduction of royalties and without including any royalty interests of the issuer; (ii) in relation to wells, the total number of wells in which an issuer has an interest; and (iii) in relation to properties, the total area of properties in which an issuer has an interest.

“ net ” means: (i) in relation to an issuer’s interest in production or reserves its working interest (operating or non-operating) share after deduction of royalty obligations, plus its royalty interests in production or reserves; (ii) in relation to an issuer’s interest in wells, the number of wells obtained by aggregating the issuer’s working interest in each of its gross wells; and (iii) in relation to an issuer’s interest in a property, the total area in which the issuer has an interest multiplied by the working interest owned by the issuer.

“ working interest ” means the percentage of undivided interest held by an issuer in the oil and/or natural gas or mineral lease granted by the mineral owner, Crown or freehold, which interest gives the issuer the right to “work” the property (lease) to explore for, develop, produce and market the leased substances.

Description of Exploration and Development Wells and Costs

“ development costs ” means costs incurred to obtain access to reserves and to provide facilities for extracting, treating, gathering and storing the crude oil and natural gas from the reserves. More specifically, development costs, including applicable operating costs of support equipment and facilities and other costs of development activities, are costs incurred to: (i) gain access to and prepare well locations for drilling, including surveying well locations for the purpose of determining specific development drilling sites, clearing ground, draining, road building, and relocating public roads, gas lines and power lines, to the extent necessary in developing the reserves; (ii) drill and equip development wells, development type stratigraphic test wells and service wells, including the costs of platforms and of well equipment such as casing, tubing, pumping equipment and wellhead assembly; (iii) acquire, construct and install production facilities such as flow lines, separators, treaters, heaters, manifolds, measuring devices and production storage tanks, natural gas cycling and processing plants, and central utility and waste disposal systems; and (iv) provide improved recovery systems.

“ development well ” means a well drilled inside the established limits of an oil or gas reservoir, or in close proximity to the edge of the reservoir, to the depth of a stratigraphic horizon known to be productive.

“ exploration costs ” means costs incurred in identifying areas that may warrant examination and in examining specific areas that are considered to have prospects that may contain oil and natural gas reserves, including costs of drilling exploratory wells and exploratory type stratigraphic test wells. Exploration costs may be incurred both before acquiring the related property (sometimes referred to in part as “prospecting costs”) and after acquiring the property. Exploration costs, which include applicable operating costs of support equipment and facilities and other costs of exploration activities, are: (i) costs of topographical, geochemical, geological and geophysical studies, rights of access to properties to conduct those studies, and salaries and other expenses of geologists, geophysical crews and others conducting those studies (collectively sometimes referred to as “geological and geophysical costs”); (ii) costs of carrying and retaining unproved properties, such as delay rentals, taxes (other than income and capital taxes) on properties, legal costs for title defence, and the maintenance of land and lease records; (iii) dry hole contributions and bottom hole contributions; (iv) costs of drilling and equipping exploratory wells; and (v) costs of drilling exploratory type stratigraphic test wells.

“ exploration well ” means a well that is not a development well, a service well or a stratigraphic test well.

“ service well ” means a well drilled or completed for the purpose of supporting production in an existing field. Wells in this class are drilled for the following specific purposes: gas injection (natural gas, propane, butane or flue gas), water injection, steam injection, air injection, salt water disposal, water supply for injection, observation or injection for combustion.

GLOSSARY OF TERMS

The following is a glossary of certain terms used in this Information Circular, including in the section entitled “ General Information ” and in Appendices H and I attached hereto.

“ ABCA ” means the Business Corporations Act , R.S.A. 2000, c. B 9, as amended, including the regulations promulgated thereunder.

“ Acquisitionco ” means the wholly-owned subsidiary of Surge to be incorporated by Surge prior to the Effective Date for the purposes of participating in the Plan of Arrangement.

“ Acquisition Proposal ” means, other than the Arrangement, any inquiry or the making of any offer or proposal, whether or not in writing or subject to a due diligence or other condition, to AOC, or AOC Shareholders or any other securityholder of AOC (including any take-over bid initiated by advertisement or circular) from any Person or Persons acting “ jointly or in concert ” (where such phrase has the meaning ascribed thereto in Applicable Securities Laws) prior to the termination of the Arrangement Agreement or consummation of the Arrangement, as applicable, which constitutes, or may reasonably be expected to lead to (in either case whether in one transaction or a series of transactions):

(i) any direct or indirect sale, issuance or acquisition of securities of AOC that, when taken together with any securities of AOC held by the proposed acquiror, and any Person acting jointly or in concert with such acquiror, and assuming the conversion of any convertible securities held by the proposed acquiror, and any Person acting jointly or in concert with such acquiror, would constitute beneficial ownership of 20% or more of the outstanding voting securities of AOC or rights or interests therein;
(ii) any direct or indirect acquisition or purchase (or any lease, long term supply agreement or other arrangement having the same economic effect as an acquisition or purchase) of assets of AOC that constitute 20% or more of the assets of AOC (on a consolidated basis measured by the fair market value thereof as of the date of any such inquiry, offer or proposal);
(iii) an amalgamation, arrangement, merger, business combination, consolidation, share exchange or other similar transaction involving AOC;
(iv) a take-over bid, issuer bid, tender offer, exchange offer, recapitalization, liquidation, dissolution, reorganization or other similar transaction involving AOC; or
(v) any other transaction, the consummation of which would or could reasonably be expected to impede, interfere with, prevent or delay the transactions contemplated by the Arrangement Agreement or the Arrangement or which would or could reasonably be expected to materially reduce the benefits to the Parties under the Arrangement Agreement or the Arrangement,

except that for the purpose of the definition of “ Superior Proposal ”, the references in the definition of “ Acquisition Proposal ” to: (A) “20% or more of the outstanding voting securities of AOC or rights or interests therein” shall be deemed to be references to “50% or more of the outstanding voting securities of AOC or rights or interests therein”; and (B) “20% or more of the assets” shall be deemed to be references to “50% or more of the assets”.

“ affiliate ” and “ associate ” have the meanings ascribed thereto in the Securities Act.

“ allowable capital loss ” has the meaning set forth under the heading “ Certain Canadian Federal Income Tax Considerations – Taxation of Capital Gains and Losses ”.

“ Amalco ” means the continuing corporation resulting from the amalgamation of Amalco1 and Surge pursuant to subsection 3.1(g) of the Plan of Arrangement.

“ Amalco1 ” means the continuing corporation resulting from the amalgamation of Acquisitionco and AOC pursuant to subsection 3.1(e) of the Plan of Arrangement.

“ AOC ” means Astra Oil Corp., a corporation existing under the ABCA.

“ AOC Annual Financial Statements ” means the audited financial statements of AOC as at and for the years ended December 31, 2020 and 2019, together with the notes thereto and the auditors’ report thereon.

“ AOC Arrangement Resolution ” means the special resolution of AOC Shareholders to consider and, if thought advisable, to approve, with or without amendment, the Arrangement to be considered by the AOC Shareholders at the AOC Meeting substantially in the form attached as Appendix A.

“ AOC Assets ” means all of the assets, properties, facilities, Government Authorizations, rights or other privileges (whether contractual or otherwise) of, and securities owned by, AOC, and, for greater certainty, including AOC’s petroleum, natural gas and related hydrocarbons, as well as AOC’s leases, concessions, concession agreements, contracts, subleases, reservations and other agreements.

“ AOC Board ” means the board of directors of AOC as it may be comprised from time to time.

“ AOC Closing Share Register ” means the final register of AOC Shareholders, to be delivered to Surge, by AOC’s registrar and transfer agent, prior to the Effective Time, which register shall include the name of each AOC Shareholder and the number of AOC Shares held by each AOC Shareholder immediately prior to the Effective Time.

“ AOC Credit Facilities ” means the credit facilities of AOC.

“ AOC D&O Shareholders ” means each director and officer of AOC holding AOC Shares, except for such directors and officers that are AOC Lock-Up Shareholders.

“ AOC Damages Event ” has the meaning set forth under the heading “ The Arrangement – The Arrangement Agreement – Termination Fees – AOC Damages ”.

“ AOC Disclosure Letter ” means the disclosure letter from AOC to Surge dated June 22, 2021.

“ AOC Dissent Rights ” means the right of a registered AOC Shareholder to dissent to the AOC Arrangement Resolution and to be paid the fair value of the AOC Shares, in respect of which the holder dissents, all in accordance with Section 191 of the ABCA, the Interim Order and the Plan of Arrangement.

“ AOC Exercise and Cancellation Agreements ” means agreements each dated June 29, 2021 between AOC and the holders of AOC Incentives whereby each holder of AOC Incentives agreed to exercise on a “cashless exercise” basis or surrender such holder’s AOC Incentives.

“ AOC Fairness Opinion ” means the fairness opinion of NBF delivered to the AOC Board, dated June 22, 2021, to the effect that, as of the date of such opinion and subject to the assumptions, limitations and qualifications and other matters stated in such opinion, the Consideration to be received by AOC Shareholders, pursuant to the Arrangement is fair, from a financial point of view, to the AOC Shareholders.

“ AOC Financial Advisory Agreement ” means the engagement agreement dated April 30, 2021 between AOC and NBF.

“ AOC Financial Advisory Fees ” means the fees or other amounts payable by AOC under the AOC Financial Advisory Agreement.

“ AOC Incentives ” means, collectively, the AOC Options and the AOC Warrants.

“ AOC Letter of Transmittal ” means the letter of transmittal, printed on yellow paper, provided to registered AOC Shareholders in connection with the Arrangement.

“ AOC Lock-Up Shareholders ” means each AOC Shareholder who, collectively with its affiliates and any Persons acting jointly or in concert with such AOC Shareholder, will have the right to receive a number of Surge Shares equal to 5% or more of the outstanding Surge Shares pro forma the completion of the Arrangement.

“ AOC Meeting ” means the special meeting of AOC Shareholders to be held to consider the AOC Arrangement Resolution and related matters, and any adjournment(s) or postponement(s) thereof.

“ AOC Option Plan ” means the stock option plan of AOC in effect on the date hereof and the agreements entered into thereunder.

“ AOC Options ” means options granted pursuant to the AOC Option Plan.

“ AOC Proxy Deadline ” means 8:30 a.m. (Calgary time) on August 13, 2021, or 48 hours (excluding Saturdays, Sundays and statutory holidays in the Province of Alberta) prior to the time of any adjournment or postponement of the AOC Meeting.

“ AOC Record Date ” means the close of business on July 13, 2021.

“ AOC Reserve Report ” means the report prepared by Sproule entitled “Evaluation of the P&NG Reserves of Astra Oil Corp. (As of December 31, 2020)”, dated March 10, 2021.

“ AOC Shareholder Agreement ” means the shareholder agreement dated October 1, 2014 by and among AOC and certain of the AOC Shareholders.

“ AOC Shareholders ” means the holders of AOC Shares.

“ AOC Shares ” means common shares in the share capital of AOC.

“ AOC Support Agreements ” means agreements each dated June 22, 2021 between Surge and each AOC Supporting Shareholder pursuant to which such AOC Supporting Shareholder agreed with Surge, among other things (but subject to the terms and conditions of (and exceptions under) such agreement with such AOC Supporting Shareholder):

(i) to vote in favour of the AOC Arrangement Resolution and otherwise support the transactions contemplated by the Arrangement Agreement; and
(ii) to certain resale restrictions on certain Surge Shares acquired by the AOC Supporting Shareholder pursuant to the Arrangement.

“ AOC Supporting Shareholders ” means, together: (i) the AOC D&O Shareholders; and (ii) the AOC Lock-Up Shareholders.

“ AOC Termination Amount ” has the meaning set forth under the heading “ The Arrangement Agreement – Termination of the Arrangement Agreement ”.

“ AOC Termination Payment ” has the meaning set forth under the heading “ Interests of Certain Persons or Companies in the Arrangement – AOC – Termination Payments ”.

“ AOC Warrants ” means the performance warrants of AOC.

“ Applicable Laws ”, in the context that refers to one or more Persons, means any domestic or foreign, federal, state, provincial or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority, and any terms and conditions of any grant of approval, permission, authority or license of any Governmental Authority, that is binding upon or applicable to such Person or Persons or its or their business, undertaking, property or securities and emanate from a Person having jurisdiction over the Person or Persons or its or their business, undertaking, property or securities.

“ Applicable Securities Laws ” means, collectively, and as the context may require, the applicable securities legislation of each of the provinces and territories of Canada, and the rules, regulations, instruments, orders and policies published and/or promulgated thereunder, as such may be amended from time to time prior to the Effective Date.

“ ARC ” means an advance ruling certificate issued pursuant to section 102 of the Competition Act.

“ Arrangement ” means the arrangement under the provisions of Section 193 of the ABCA, on the terms and conditions set forth in the Arrangement Agreement and the Plan of Arrangement as supplemented, modified or amended.

“ Arrangement Agreement ” means the arrangement agreement dated June 22, 2021, between AOC and Surge, as amended or supplemented and/or restated from time to time.

“ Articles of Arrangement ” means the articles of arrangement in respect of the Arrangement required under Subsection 193(10) of the ABCA to be filed with the Registrar after the Final Order has been granted, giving effect to the Arrangement.

“ Beneficial Shareholder ” has the meaning set forth under the heading “ General Information – Information for Beneficial Shareholders ”.

“ Broadridge ” has the meaning set forth under the heading “ General Information – Information for Beneficial Shareholders ”.

“ Business Day ” means a day on which banks are generally open for the transaction of commercial business in Calgary, Alberta, but does not in any event include a Saturday or Sunday or statutory holiday in Alberta.

“ CDS ” means CDS Clearing and Depository Services Inc.

“ Certificate ” means the certificate or certificates or other confirmation of filing to be issued by the Registrar pursuant to Section 193(11) of the ABCA giving effect to the Arrangement.

“ Commissioner of Competition ” means the Commissioner of Competition appointed under the Competition Act and any Person authorized under the Competition Act to exercise the powers and perform the duties of the Commissioner of Competition.

“ Competition Act ” means the Competition Act , R.S.C. 1985, c. C 34, as amended.

“ Competition Act Approval ” means:

(i) the issuance of an ARC;
(ii) the Parties have given the notice required under section 114 of the Competition Act with respect to the transactions contemplated by the Arrangement Agreement and the applicable waiting period under section 123 of the Competition Act has expired or been waived in accordance with the Competition Act; or
(iii) the obligation to submit a notification has been waived pursuant to subsection 113(c) of the Competition Act,

and in the case of (ii) or (iii), Surge or AOC (directly or through either Party’s counsel) has been issued a No-Action Letter and the form of and any terms and conditions attached to any such advice are acceptable to the Parties, acting reasonably, and such advice has not been rescinded or amended.

“ Confidentiality Agreements ” means the confidentiality agreements dated April 16, 2021 and May 31, 2021, respectively, each between Surge and AOC.

“ Consideration ” means 3.1746 Surge Shares for each AOC Share held.

“ Court ” means the Court of Queen’s Bench of Alberta.

“ CRA ” means the Canada Revenue Agency.

“ Depositary ” means Odyssey Trust Company or such other trust company that may be appointed by Surge and AOC for the purpose of receiving deposits of certificates formerly representing AOC Shares in connection with the Arrangement at its offices referred to in each of the AOC Letter of Transmittal.

“ Dissent Rights ” means the rights of dissent granted pursuant to section 191 of the ABCA in favour of registered AOC Shareholders in respect of the Arrangement as described in the Plan of Arrangement and the Interim Order.

“ Dissenting AOC Shareholders ” means the registered AOC Shareholders that validly exercise the AOC Dissent Rights and “ Dissenting AOC Shareholder ” means any one of them.

“ DRS Advice ” or “ DRS Statement ” means a Direct Registration System (DRS) advice or statement.

“ Effective Date ” means the date the Arrangement becomes effective pursuant to the ABCA, being the date shown on the Certificate.

“ Effective Time ” means the time on the Effective Date when the Arrangement becomes effective pursuant to the ABCA.

“ Elected Amount ” has the meaning set forth under the heading “ Certain Canadian Federal Income Tax Considerations – Participation in the Arrangement – With a Section 85 Election ”.

“ Encumbrances ” has the meaning ascribed to it in the Arrangement Agreement, which is attached as Appendix D to this Information Circular.

“ Environment ” means the natural environment (including soil, land surface or subsurface strata), surface waters, groundwater, sediment, ambient air (including all layers of the atmosphere), organic and inorganic matter and living organisms, and any other environmental medium or natural resource and all sewer systems.

“ Environmental Laws ” means all Applicable Laws relating in whole or in part to the protection of the Environment and employee and public health and safety, and includes, without limitation, those Applicable Laws relating to the storage, generation, use, handling, manufacture, processing, labeling, advertising, sale, display, transportation, treatment, release and disposal of Hazardous Substances.

“ Excess Amount ” means, in respect of an AOC Option or AOC Warrant, as applicable, the amount by which $2.00 exceeds the exercise price of such AOC Option or AOC Warrant.

“ Exchanging Shareholders ” means AOC Shareholders who at all relevant times are not Non-Resident AOC Shareholders or Dissenting AOC Shareholders.

“ Final Order ” means the order of the Court approving the Arrangement pursuant to subsection 193(9) of the ABCA, as such order may be affirmed, amended or modified by the Court (with the consent of each of AOC and Surge, each acting reasonably) at any time prior to the Effective Date or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed or as amended (provided that such amendment is acceptable to each of AOC and Surge, each acting reasonably) on appeal.

“ forward-looking information ” has the meaning set forth under the heading “ General Information – Cautionary Notice Regarding ForwardLooking Statements and Information ”.

“ GAAP ” means generally accepted accounting principles from time to time approved by the Chartered Professional Accountants of Canada, or any successor institute, which, for greater certainty, shall include International Financial Reporting Standards.

“ Governmental Authority ” means any:

(i) multinational, federal, provincial, state, regional, municipal, local or other government or any governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau, ministry or agency, domestic or foreign;
(ii) subdivision, agent, commission, board or authority of any of the foregoing;
(iii) quasi-governmental or private body exercising any regulatory, expropriation or Taxing Authority under or for the account of any of the foregoing; and
(iv) stock exchange.

“ Government Authorization ” means with respect to a Person, all licenses, permits, certificates, consents, orders, grants, registrations, recognition orders, exemption relief orders, no-action relief and other authorizations (including in connection with Environmental Laws) from any Governmental Authority necessary in connection with its business as it is now being or proposed to be conducted.

“ Hazardous Substances ” means any element, waste or other substance whether natural or artificial and whether consisting of gas, liquid, solid or vapour that is prohibited, listed, defined, designated or classified as dangerous, hazardous, radioactive, explosive or toxic or a pollutant or a contaminant under or pursuant to any applicable Environmental Laws, and specifically including petroleum and all derivatives thereof or synthetic substitutes therefor and asbestos or asbestos-containing materials or any substance which is deemed under Environmental Laws to be deleterious to the Environment or worker or public health and safety.

“ Information Circular ” means this notice of AOC Meeting, notice of Surge Meeting and accompanying joint management information circular of AOC and Surge, together with all appendices thereto, mailed or otherwise distributed by AOC to the AOC Shareholders and Surge to the Surge Shareholders and such other securityholders of AOC or Surge as may be required pursuant to the Interim Order in connection with the AOC Meeting and the Surge Meeting pursuant to Applicable Laws.

“ Initial Debentures ” means the 5.75% convertible secured subordinated debentures of Surge due on December 31, 2022.

“ Interim Order ” means the interim order of the Court dated July 15, 2021 concerning the Arrangement under Subsection 193(4) of the ABCA in respect of AOC and the AOC Shareholders, containing declarations and directions with respect to the Arrangement and the holding of the AOC Meeting as such order may be affirmed, amended or modified by any court of competent jurisdiction.

“ Intermediary ” has the meaning set forth under the heading “ General Information – Information Contained in this Information Circular ”.

“ ITA ” means the Income Tax Act , R.S.C. 1985, c. 1 (5th Supp.), as amended, including the regulations promulgated thereunder.

“ Material Adverse Change ” or “ Material Adverse Effect ” means, with respect to either Party, any fact or state of facts, circumstance, change, effect, occurrence or event that individually or in the aggregate is, or would reasonably be expected to be, material and adverse to the condition (financial or otherwise), business, operations, properties, licenses, affairs, assets, liabilities (contingent or otherwise), capitalization, results of operations, cash flows or prospects of such Party (taken as a whole), or will, or would reasonably be expected to, prevent, materially delay or materially impair the ability of the Parties to consummate the transactions contemplated by the Arrangement Agreement, other than any fact, state of facts, circumstance, change, effect, occurrence or event relating to or resulting from:

(i) any change, development or condition in or relating to global, national or regional political conditions (including strikes, lockouts, riots, blockades or facility takeover for emergency purposes) or in general economic, business, banking, regulatory, currency exchange, interest rate, rates of inflation or market conditions or in national or global financial or capital markets;
(ii) conditions affecting the oil and gas industry generally in jurisdictions in which such Party carries on business, including any change in the market price of crude oil, natural gas or related hydrocarbons on a current of forward basis;
(iii) any change, development or condition resulting from any act of terrorism or any outbreak of hostilities or declared or undeclared war, or any escalation or worsening of such acts of terrorism, hostilities or war;
(iv) any adoption, proposal, implementation or change in Applicable Law or in any interpretation, application or non-application of any Applicable Laws by any Governmental Authority (including, for greater certainty, any change to the ITA or other applicable taxing legislation or to tax rates) including changes in Applicable Laws (including Tax laws) and royalties;
(v) any climatic, earthquake or other natural event or condition (including weather conditions and any natural disaster);
(vi) any epidemic, pandemic, disease outbreak (including COVID-19), other health crisis or public health event;
(vii) any matter which has been publicly disclosed prior to the date hereof or that is set forth in either of the AOC Disclosure Letter or the Surge Disclosure Letter, as applicable;
(viii) any changes or effects arising, directly or indirectly, from the Arrangement or any other matters or actions permitted or contemplated by the Arrangement Agreement, including any public announcement of the foregoing, or consented to or approved in writing by the Other Party; or
(ix) with respect to Surge, a change in the market trading price or trading volume of the Surge Shares (provided, however, that the causes underlying such changes may be considered to determine whether such causes constitute a Material Adverse Change or Material Adverse Effect),

provided, however, that: (A) the change or effect referred to in clause (i) to (vi) above does not primarily relate only to (or have the effect of primarily relating only to) the applicable Party or disproportionately affects the applicable Party compared to other entities of similar size operating in the oil and gas exploration, exploitation, development and production industry, in which case the relevant exclusion from this definition of Material Adverse Change or Material Adverse Effect referred to above shall not be applicable; and (B) unless expressly provided in any particular section of the Arrangement Agreement, references in certain sections of the Arrangement Agreement to dollar amounts are not intended to be, and shall not be deemed to be, illustrative or interpretive for purposes of determining whether a “ Material Adverse Change ” or “ Material Adverse Effect ” has occurred.

“ Meetings ” means, collectively, the AOC Meeting and the Surge Meeting and “ Meeting ” means, as the context requires, the AOC Meeting or the Surge Meeting.

“ Meeting Materials ” has the meaning set forth under the heading “ General Information – Information for Beneficial Shareholders ”.

“ NBF ” means National Bank Financial Inc.

“ NI 51-101 ” means National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities .

“ No-Action Letter ” means a written confirmation from the Commissioner that he does not, at that time, intend to make an application under section 92 of the Competition Act.

“ Non-Resident AOC Shareholder ” has the meaning set forth under the heading “ Certain Canadian Federal Income Tax Considerations – AOC Shareholders Not Resident in Canada ”.

“ Non-Resident Dissenting Shareholder ” has the meaning set forth under the heading “ General Information – Cautionary Notice Regarding Forward-Looking Statements and Information ”.

“ Non-Resident Surge Shareholder ” has the meaning set forth under the heading “ Certain Canadian Federal Income Tax Considerations – Non-Resident Dissenting Holder ”.

“ Notice of Application ” means the Notice of Application to the Court for the Final Order, which is attached as Appendix C to this Information Circular.

“ Other Party ” means: (i) with respect to AOC, Surge; and (ii) with respect to Surge, AOC.

“ Outside Date ” means October 31, 2021 or such other date as the Parties may agree in writing.

“ Parties ” means, collectively, AOC and Surge, and “ Party ” means either one of them.

“ Performance Share Awards ” means the performance share awards granted pursuant to Surge’s stock incentive plan.

“ Person ” includes any individual, firm, partnership, joint venture, venture capital fund, association, trust, trustee, executor, administrator, legal personal Representative, estate group, body corporate, corporation, unincorporated association or organization, Governmental Authority, syndicate or other entity, whether or not having legal status.

“ Plan of Arrangement ” means the plan of arrangement in the form set out in Exhibit “A” to the Arrangement Agreement, which is attached as Appendix D to this Information Circular, as such plan of arrangement may be amended or supplemented from time to time in accordance with the Arrangement Agreement.

“ QSBC Shares ” has the meaning set forth under the heading “ Certain Canadian Federal Income Tax Considerations - Lifetime Capital Gains Deduction “.

“ Registered Holder ” has the meaning set forth under the heading “ General Information – Information for Beneficial Shareholders ”.

“ Registrar ” means the Registrar of Corporations or a Deputy Registrar of Corporations appointed under Section 263 of the ABCA.

“ Representatives ” has the meaning set forth under the heading “ The Arrangement – Covenants Regarding Non-Solicitation ”.

“ Resident AOC Shareholder ” has the meaning set forth under the heading “ Certain Canadian Federal Income Tax Considerations – AOC Shareholders Resident in Canada ”.

“ Restricted Share Awards ” means the restricted share awards granted pursuant to Surge’s stock incentive plan.

“ RDSPs ” has the meaning set forth under the heading “ Certain Canadian Federal Income Tax Considerations – Eligibility for Investment ”.

“ RESPs ” has the meaning set forth under the heading “ Certain Canadian Federal Income Tax Considerations – Eligibility for Investment ”.

“ RRIFs ” has the meaning set forth under the heading “ Certain Canadian Federal Income Tax Considerations – Eligibility for Investment ”.

“ RRSPs ” has the meaning set forth under the heading “ Certain Canadian Federal Income Tax Considerations – Eligibility for Investment ”.

“ Scotiabank ” means Scotia Capital Inc.

“ SEC ” has the meaning set forth under the heading “ Certain Canadian Federal Income Tax Considerations – Participation in the Arrangement – Section 85 Election ”.

“ Section 85 Election ” has the meaning set forth under the heading “ General Information – Information for Beneficial Shareholders ”.

“ Securities ” means, each of the AOC Shares and the Surge Shares, as the context requires.

“ Securities Act ” means the Securities Act , R.S.A. 2000, c. S 4, as amended.

“ Securityholders ” means, the AOC Shareholders and the Surge Shareholders, as the context requires.

“ Series 2 Debentures ” means the 6.75% convertible unsecured subordinated debentures of Surge due on June 30, 2024.

“ Sproule ” means Sproule Associates Limited.

“ Superior Proposal ” means an unsolicited written bona fide Acquisition Proposal made after the date of the Arrangement Agreement from a Person (other than Surge):

(i) that is not subject to any financing condition, and in respect of any funds required to complete the Acquisition Proposal, such funds have been demonstrated to be readily available to the satisfaction of the AOC Board, acting in good faith (after receipt of advice from its financial advisors and outside legal counsel);
(ii) that the AOC Board has determined in good faith (after receipt of advice from its financial advisors and outside legal counsel) is capable of being completed in accordance with its terms without undue delay, taking into account all financial, legal regulatory and other aspects of such proposal and the Person making such proposal;
(iii) that is in compliance with all Applicable Laws;
(vi) that did not result from or involve a breach of Section 3.4 of the Arrangement Agreement;
(v) that is not subject to any due diligence or access condition, other than to permit access to the books, records or personnel of AOC which is not more extensive than that which would customarily be provided for confirmatory due diligence purposes; and
(vi) in respect of which the AOC Board determined in good faith (after the receipt of advice from their legal counsel with respect to (A) and its financial advisors with respect to (B)) that: (A) in each case as reflected in the minutes of the AOC Board, in the case of paragraph 3.4(b)(vi)(A) of the Arrangement Agreement, failure to take such action would be inconsistent with its fiduciary duties, and in the case of paragraphs 3.4(b)(vii) and 3.4(d) of the Arrangement Agreement, failure to recommend such Acquisition Proposal to AOC Shareholders would be inconsistent with its fiduciary duties; and (B) such Acquisition Proposal, taking into account all of the terms and conditions thereof, if consummated in accordance with its terms (but not assuming away any risk of non-completion), would result in a transaction more favourable to AOC Shareholders from a financial point of view than the transactions contemplated by the Arrangement Agreement (including in each case after taking into account any modifications to the Arrangement Agreement proposed by the Parties as contemplated by Section 3.4(e) of the Arrangement Agreement).

“ Supplementary Information Request ” has the meaning set forth under the heading “ The Arrangement – Competition Act Approval ”.

“ Surge ” means Surge Energy Inc., a corporation existing under the ABCA.

“ Surge 2021 Information Circular ” means the information circular of Surge dated March 31, 2021 in respect of the annual meeting of Surge Shareholders held on May 12, 2021.

“ Surge AIF ” means the annual information form of Surge for the year ended December 31, 2020 dated March 9, 2021.

“ Surge Annual Financial Statements ” means the audited financial statements of Surge as at and for the years ended December 31, 2020 and 2019, together with the notes thereto and the auditor’s report thereon.

“ Surge Annual MD&A ” means Surge’s management discussion and analysis of the financial condition and results of operations of Surge as at December 31, 2020 and for the three and twelve months ended December 31, 2020 and 2019.

“ Surge Board ” means the board of directors of Surge as it may be comprised from time to time.

“ Surge Credit Facilities ” means the syndicated credit facilities of Surge, comprised of: (i) $215 million extendible revolving term, non-revolving term and operating credit facilities; and (ii) a $40 million non-revolving term credit facility maturing November 17, 2024, in each case with a syndicate of banks led by National Bank of Canada.

“ Surge Damages Event ” has the meaning set forth under the heading “ The Arrangement – Termination Fees – Surge Damages ”.

“ Surge Debentures ” means collectively, the Initial Debentures and the Series 2 Debentures.

“ Surge Disclosure Letter ” means the disclosure letter from Surge to AOC dated June 22, 2021.

“ Surge Financial Statements ” means the Surge Annual Financial Statements and the Surge Interim Financial Statements.

“ Surge Interim Financial Statements ” means the unaudited interim condensed financial statements of Surge as at and for the three month periods ended March 31, 2021 and 2020, together with the notes thereto.

“ Surge Interim MD&A ” means Surge’s management’s discussion and analysis of the financial condition and results of operations of Surge as at and for the three month periods ended March 31, 2021 and 2020.

“ Surge Issuance Resolution ” means the ordinary resolution of Surge Shareholders in respect of the issuance of Surge Shares pursuant to the Arrangement to be considered at the Surge Meeting substantially in the form attached as Appendix B-1.

“ Surge Letter of Transmittal ” means the letter of transmittal, printed on blue paper, provided to registered Surge Shareholders in connection with the Surge Share Consolidation.

“ Surge Meeting ” means the meeting of Surge Shareholders to consider the Surge Issuance Resolution and, if applicable, the Surge Share Consolidation Resolution and related matters, and any adjournment(s) or postponement(s) thereof.

“ Surge Reserve Report ” means the report dated March 3, 2021 evaluating the crude oil, natural gas liquids and natural gas reserves of Surge as at December 31, 2020.

“ Surge Share Consolidation ” means the proposed consolidation of the Surge Shares on the basis of one (1) post-consolidation Surge Share for each 8.5 pre-consolidation Surge Shares.

“ Surge Share Consolidation Resolution ” means the special resolution of Surge Shareholders, substantially in the form attached as Appendix B-2, to be considered at the Surge Meeting, conditional upon the Surge Issuance Resolution being passed at the Surge Meeting, in respect of the Surge Share Consolidation.

“ Surge Shareholders ” means the holders of Surge Shares.

“ Surge Shares ” means common shares in the capital of Surge and includes the common shares in the capital of Amalco issued and outstanding upon completion of the Arrangement, as applicable.

“ Surge Subsidiary ” means 1413942 Alberta Ltd.

“ Surge Termination Fee ” has the meaning set forth under the heading “ The Arrangement Agreement – Termination of Arrangement Agreement ”.

“ Tax ” or “ Taxes ” has the meaning ascribed to it in the Arrangement Agreement, which is attached as Appendix D to this Information Circular.

“ Tax Pools ” has the meaning ascribed to it in the Arrangement Agreement, which is attached as Appendix D to this Information Circular.

“ Taxable Capital Gain ” has the meaning set forth under the heading “ Certain Canadian Federal Income Tax Considerations – Taxation of Capital Gains and Losses ”.

“ Taxing Authority ” shall mean any Governmental Authority responsible for the imposition of any Tax (domestic or foreign).

“ TFSA ” has the meaning set forth under the heading “ Certain Canadian Federal Income Tax Considerations – Eligibility for Investment ”.

“ Transfer Agent ” means Odyssey Trust Company in its capacity as transfer agent for the Surge Shares.

“ Tribunal ” has the meaning set forth under the heading “ The Arrangement – Competition Act Approval ”.

“ TSX ” means the Toronto Stock Exchange.

“ United States ” means the United States of America, its territories and possessions, any state of the United States, and the District of Columbia.

“ U.S. Exchange Act ” means the United States Securities Exchange Act of 1934 , as amended, and the rules, regulations and orders promulgated thereunder.

“ U.S. Securities Act ” means the United States Securities Act of 1933 , as amended, and the rules, regulations and orders promulgated thereunder.

“ Voting Instruction Form ” has the meaning set forth under the heading “ General Information – Information for Beneficial Shareholders ”.

SUMMARY INFORMATION

The following is a summary of certain information contained elsewhere in this Information Circular, including the Appendices hereto, and is qualified in its entirety by reference to the more detailed information contained or referred to elsewhere in this Information Circular or in the Appendices hereto. Capitalized terms not otherwise defined herein are defined in the “ Glossary of Terms ”. For details on the matters to be considered by the AOC Shareholders, see “ Matters to be Acted Upon at the AOC Meeting .” For details on the matters to be considered by the Surge Shareholders, see “ Matters to be Acted Upon at the Surge Meeting .”

The Corporations

AOC

AOC is a junior oil and natural gas producer headquartered in Calgary, Alberta with operations focused in the Western Canadian Sedimentary Basin in Alberta and the Williston Basin in Saskatchewan and Manitoba.

For a more complete description of AOC’s business see “ Information Concerning AOC ” and Appendix G – “Information Concerning AOC ”.

Surge

Surge is an oil focused exploration and production company located in Alberta and Southwest Saskatchewan. Surge is a reporting issuer in each of the provinces of Canada and the Surge Shares are listed on the TSX under the trading symbol “SGY”. On June 21, 2021, the last trading day prior to the announcement of the proposed Arrangement, the closing price of the Surge Shares on the TSX was $0.68 per share. On July 15, 2021, the closing price of the Surge Shares on the TSX was $0.60 per share.

For a more complete description of Surge’s business see “ Information Concerning Surge ” and Appendix H – “Information Concerning Surge ”.

The AOC Meeting

The AOC Meeting will be held at the offices of Burnet, Duckworth & Palmer LLP, Suite 2400, 525 – 8[th] Avenue S.W., Calgary Alberta at 8:30 a.m. (Calgary time) on August 17, 2021, for the purposes set forth in the accompanying notice of meeting of AOC Shareholders.

The Surge Meeting

The Surge Meeting will be held by virtual-only means at 9:30 a.m. (Calgary time) on August 17, 2021, for the purposes set forth in the accompanying notice of meeting of Surge Shareholders.

Background to the Arrangement

The terms of the Arrangement are the result of arm’s length negotiations between representatives of Surge and AOC and their respective financial and legal advisors. This Information Circular contains a summary of the events leading up to the negotiation of the Arrangement Agreement and the meetings, negotiations, discussions and actions between the Parties that preceded the execution and public announcement of the Arrangement Agreement.

See “ The Arrangement – Background to and Reasons for the Arrangement – Background to the Arrangement ”.

Reasons For the Arrangement

AOC Board

The AOC Board has reviewed the terms of the Arrangement in detail, and after considering, among other things: (A) the AOC Fairness Opinion; (B) the anticipated benefits of the Arrangement; (C) that AOC Shareholders will gain access to liquidity while at the same time continue to participate in the oil and gas prospects of AOC while gaining exposure to a larger base of existing production and the prospect inventory of Surge; (D) the historical market price, recent trading patterns and financial information relating to other companies engaged in the same business as AOC; and (E) the risks associated with completing the Arrangement, the AOC Board unanimously: (i) determined that the Arrangement is in the best interests of AOC; (ii) determined that the Arrangement is fair to the AOC Shareholders; (iii) approved the Arrangement and the entering into of the Arrangement Agreement; and (iv) recommends that AOC Shareholders vote in favour of the AOC Arrangement Resolution.

In reaching these determinations and approvals, the AOC Board considered a number of strategic, financial, operational and other factors, including the financial metrics of the Arrangement and the long-term prospects for growth of AOC both on a stand-alone basis and in conjunction with Surge. The discussion of the information and factors considered and weight given to such information and factors by the AOC Board discussed herein is not intended to be exhaustive. In reaching the determination to approve and recommend the AOC Arrangement Resolution, the AOC Board did not assign any relative or specific weight to the factors that were considered, and individual directors may have given a different weight to each factor.

Notwithstanding the recommendation of the AOC Board that AOC Shareholders vote in favour of the AOC Arrangement Resolution, AOC Shareholders should make their own decision whether to vote their AOC Shares in favour of the AOC Arrangement Resolution and, if appropriate, should consult their own legal, financial and other professional advisors in making that decision.

See “The Arrangement – Recommendations of the AOC Board” and “- Background to and Reasons for the Arrangement – Reasons for the Arrangement – AOC Board ”.

Surge Board

Following receipt of the advice and assistance of its financial advisors and legal counsel, the Surge Board carefully evaluated the terms of the proposed Arrangement and unanimously: (i) determined that the Arrangement is in the best interests of Surge; (ii) approved the Arrangement and the entering into of the Arrangement Agreement and completion of all transactions contemplated thereby; and (iii) resolved to recommend that Surge Shareholders vote in favour of the Surge Issuance Resolution and the Surge Share Consolidation Resolution.

In reaching these determinations and approvals, the Surge Board considered a number of strategic, financial, operational and other factors, including the financial metrics of the Arrangement and the long-term prospects for growth of Surge both on a stand-alone basis and in conjunction with AOC. The discussion of the information and factors considered and weight given to such information and factors by the Surge Board as discussed herein in making the above determinations, approvals and recommendations is not intended to be exhaustive. In reaching the determination to recommend the approval of the Surge Issuance Resolution by the Surge Shareholders, the Surge Board did not assign any relative or specific weight to the factors that were considered, and individual directors may have given a different weight to each factor.

Notwithstanding the recommendation of the Surge Board that Surge Shareholders vote in favour of the Surge Issuance Resolution, Surge Shareholders should make their own decision whether to vote their Surge Shares in favour of the Surge Issuance Resolution and, if appropriate, should consult their own legal, financial and other professional advisors in making that decision.

See “ The Arrangement – Background to and Reasons for the Arrangement – Reasons for the Arrangement – Surge Board ” and “- Recommendations of the Surge Board ”.

AOC Supporting Shareholders

All of the directors and executive officers of AOC and the AOC Lock-Up Shareholders have entered into AOC Support Agreements, collectively representing approximately 70.07% of the issued and outstanding AOC Shares, pursuant to which such AOC Supporting Shareholders have agreed to, among other things, vote in favour of the AOC Arrangement Resolution and otherwise support the transactions contemplated by the Arrangement Agreement. The AOC Support Agreements also contemplate certain resale restrictions on the Surge Shares acquired by AOC Supporting Shareholders for a period of up to 9 months following the completion of the Arrangement, subject to certain exceptions.

See “ The Arrangement – AOC Supporting Shareholders ”.

Recommendations of the AOC Board

The discussion of the information and factors considered and weight given to such information and factors by the AOC Board discussed herein is not intended to be exhaustive. In reaching the determination to approve and recommend the AOC Arrangement Resolution, the AOC Board did not assign any relative or specific weight to the factors that were considered, and individual directors may have given a different weight to each factor.

See “ The Arrangement – Recommendations of the AOC Board ”.

Recommendations of the Surge Board

The Surge Board unanimously: (i) determined that the Arrangement is in the best interests of Surge; (ii) approved the Arrangement and the entering into of the Arrangement Agreement and completion of all transactions contemplated thereby; and (iii) recommends that Surge Shareholders vote in favour of the Surge Issuance Resolution.

The discussion of the information and factors considered and weight given to such information and factors by the Surge Board as discussed herein in making the above determinations, approvals and recommendations is not intended to be exhaustive. In reaching the determination to recommend the approval of the Surge Issuance Resolution by the Surge Shareholders, the Surge Board did not assign any relative or specific weight to the factors that were considered, and individual directors may have given a different weight to each factor.

The Surge Board has also unanimously determined that, subject to the Surge Issuance Resolution being approved and the Arrangement becoming effective, the Surge Share Consolidation is in the best interest of Surge and unanimously recommends that Surge Shareholders vote for the Surge Share Consolidation Resolution.

Notwithstanding the recommendation of the Surge Board that Surge Shareholders vote in favour of the Surge Issuance Resolution and the Surge Share Consolidation Resolution, as applicable, Surge Shareholders should make their own decision whether to vote their Surge Shares in favour of the Surge Issuance Resolution and, if appropriate, should consult their own legal, financial and other professional advisors in making that decision.

See “ The Arrangement – Recommendations of the Surge Board ”.

Effect of the Arrangement

General

Through a series of steps under the Arrangement, all of the issued and outstanding AOC Shares will be transferred to Surge and AOC Shareholders (other than Dissenting AOC Shareholders) will receive 3.1746 Surge Shares for each AOC Share previously held (prior to and without assuming the completion of the Surge Share Consolidation). In the event the Surge Share Consolidation is completed, AOC Shareholders (other than Dissenting AOC Shareholders) will receive approximately 0.3735 Surge Shares for each AOC Share (representing approximately 0.1176 Surge Shares for each Surge Share to be issued under the Arrangement). See “ Matters to be Acted Upon at the Surge Meeting – Surge Share Consolidation ”.

The Arrangement will have no effect on holders of Surge Shares, other than the dilution to the current shareholdings of Surge Shareholders resulting from the issuance of Surge Shares to AOC Shareholders under the Arrangement.

See also “ The Arrangement – Effect and Details of the Arrangement – General ”.

Effect on AOC Options and AOC Warrants

In connection with the entering into of the Arrangement Agreement, the AOC Board has approved the acceleration of vesting of all outstanding AOC Options and AOC Warrants to the time immediately prior to the Effective Time and conditional on the consummation of the Arrangement.

Pursuant to the Arrangement Agreement, AOC has obtained executed AOC Exercise and Cancellation Agreements from each holder of AOC Options and AOC Warrants, pursuant to which each holder of AOC Options and AOC Warrants has agreed to conditionally exercise each AOC Option and/or AOC Warrant, as applicable, held immediately prior to the Effective Time on a “cashless exercise” basis in exchange for a number of AOC Shares equal to the quotient obtained when the Excess Amount is divided by $2.00.

In addition, pursuant to the AOC Exercise and Cancellation Agreements, each holder of “out-of-the-money” AOC Warrants (being AOC Warrants with an exercise price of $2.00 or more) has agreed, conditional upon completion of the Arrangement and immediately prior to the Effective Time, to the surrender of all “out-of-the-money” AOC Warrants to AOC for cancellation for an aggregate payment of $1.00.

See also “ The Arrangement – Effect and Details of the Arrangement – Effect on AOC Options and AOC Warrants” and “ The Arrangement – Interests of Certain Persons or Companies in the Arrangement – AOC Options and AOC Warrants ”.

Details of the Arrangement

Arrangement Steps

Commencing at the Effective Time, each of the events set out below will occur and will be deemed to occur in the following order without any further act or formality except as otherwise provided in the Plan of Arrangement:

each AOC Share held by a Dissenting AOC Shareholder shall be deemed to be transferred to Surge (free and clear of any Encumbrances) and each Dissenting AOC Shareholder shall cease to have any rights as an AOC Shareholder, other than the right to be paid the fair value of such Dissenting AOC Shareholder’s AOC Shares so transferred to Surge;
each AOC Share held by an Exchanging Shareholder shall be, and shall be deemed to be, transferred to Surge (free and clear of any Encumbrances) and such Exchanging Shareholder shall cease to have any rights as an AOC Shareholder and, in exchange therefor, such Exchanging Shareholder shall receive (and for greater certainty, Surge shall issue) 3.1746 Surge Shares in respect of each AOC Share so transferred to Surge (prior to and without assuming the completion of the Surge Share Consolidation);
Acquisitionco and AOC shall be amalgamated to form Amalco1 and continue as one corporation under the ABCA in accordance with the Plan of Arrangement, including but not limited to, each AOC Share held by a Non-Resident AOC Shareholder (other than, for greater certainty, any AOC Shares transferred to Surge by an Non-Resident AOC Shareholder who is a Dissenting AOC Shareholder pursuant to Section 3.1(c)) of the Arrangement Agreement shall be, and shall be deemed to be, cancelled and such Non-Resident AOC Shareholder shall cease to have any rights as an AOC Shareholder and, in consideration therefor, such Non-Resident AOC Shareholder shall receive (and for greater certainty, Surge shall issue) 3.1746 Surge Shares in respect of each AOC Share so cancelled (prior to and without assuming the completion of the Surge Share Consolidation); and
Surge and Amalco1 shall amalgamate to form Amalco pursuant to the provisions of section 184(1) of the ABCA and continue as one corporation under the name “Surge Energy Inc.” in accordance with the terms of the Arrangement Agreement.

In the event the Surge Share Consolidation is completed, AOC Shareholders (other than Dissenting AOC Shareholders) will receive approximately 0.3735 Surge Shares for each AOC Share (representing approximately 0.1176 Surge Shares for each Surge Share to be issued under the Arrangement). See “ Matters to be Acted Upon at the Surge Meeting – Surge Share Consolidation ”.

Assuming: (i) there are no Dissenting AOC Shareholders; and (ii) the exercise and cancellation of AOC Options and AOC Warrants pursuant to the AOC Exercise and Cancellation Agreements, it is anticipated that, to effect the Arrangement, Surge will be required to issue an aggregate of up to 229,000,000 Surge Shares in exchange for all of the outstanding AOC Shares. The foregoing number includes: (i) 215,892,581 Surge Shares to be issued to former holders of AOC Shares; (ii) 10,379,688 Surge Shares issuable to the former holders of AOC Options which assumes that an additional 3,269,605 AOC Shares are issued from treasury pursuant to the “cashless exercise” of outstanding AOC Options prior to the Effective Time; (iii) 2,619,048 Surge Shares issuable to the former holders of AOC Warrants which assumes that an additional 825,001 AOC Shares are issued from treasury pursuant to the “cashless exercise” of outstanding AOC Warrants prior to the Effective Time; and (iv) an additional 108,683 Surge Shares that could be required to be issued to account for clerical and administrative matters, including to settle fractional entitlements. Upon completion of the Arrangement, there will be approximately 608,485,692 Surge Shares issued and outstanding. If the Arrangement is completed as contemplated, it is expected that former AOC Shareholders will own approximately 38% of the outstanding Surge Shares (on a non-diluted basis) subsequent to the Arrangement and Surge Shareholders will own approximately 62% of the outstanding Surge Shares (on a non-diluted basis) subsequent to the Arrangement.

See “ The Arrangement – Effect and Details of the Arrangement – General ”.

Directors and Management of Surge following Completion of the Arrangement

Following completion of the Arrangement, the Surge Board will be comprised of the same directors that currently serve on the Surge Board and the current management team at Surge will continue to act in the same capacity as senior officers of Amalco.

The Arrangement Agreement

The following is a summary of certain terms of the Arrangement Agreement and is qualified in its entirety by the full text of the Arrangement Agreement, which is attached as Appendix D to this Information Circular, and to the more detailed summary contained elsewhere in this Information Circular.

See “ The Arrangement – The Arrangement Agreement ” and Appendix D to this Information Circular for the entire text of the Arrangement Agreement.

Covenants, Representations and Warranties

The Arrangement Agreement contains customary covenants and representations and warranties for an agreement of this type, including mutual non-solicitation covenants from AOC and Surge in favour of the other.

Conditions to the Arrangement

The obligations of AOC and Surge to complete the Arrangement are subject to the satisfaction or waiver of certain conditions set out in the Arrangement Agreement which are summarized in the main body of the Information Circular. These conditions include, among others, the receipt of AOC Shareholder approval, Surge Shareholder approval, approval of the Court, the closing of the revisions to the Surge Credit Facilities and various third party approvals (including the Competition Act Approval).

Termination of Arrangement Agreement

The Arrangement Agreement may be terminated at any time prior to the Effective Date and termination fees may be payable by either party in certain circumstances. Pursuant to the Arrangement Agreement, Surge has agreed to pay AOC a termination fee in the amount of $4.35 million (the “ AOC Termination Amount ”) in certain circumstances and AOC has also agreed to pay Surge a termination fee in the amount of $4.35 million (the “ Surge Termination Fee ”) in certain circumstances. A summary of the circumstances where these payments are required to be made is provided in the main body of the Information Circular.

Risk Factors Related to the Arrangement

The completion of the Arrangement is subject to certain risks. In addition to the risk factors described under the headings “ Risk Factors ” in the Surge AIF and the Surge Financial Statements, which are specifically incorporated by reference into this Information Circular, the risk factors described under “ Risk Factors – Risk Factors Related to the Arrangement ” and other the risk factors described under “ Risk Factors – Risk Factors Concerning Surge Following Completion of the Arrangement ” and in Appendix H – “ Information Concerning Surge ” and Appendix G – “ Information Concerning AOC ”, the following is a list of certain additional and supplemental risk factors which AOC Shareholders and Surge Shareholders should carefully consider before making a decision to approve the AOC Arrangement Resolution and the Surge Issuance Resolution, respectively:

AOC and Surge may not realize the anticipated benefits of the Arrangement;
AOC and Surge may not satisfy all regulatory requirements or obtain the necessary approvals for completion of the Arrangement on satisfactory terms or at all;
the Arrangement Agreement may be terminated in certain circumstances, including in the event of a Material Adverse Change in relation to AOC or Surge;
the Arrangement may not be completed due to the failure to satisfy any conditions set out in the Arrangement Agreement, including certain conditions which are not in the control of AOC or Surge;
the market price for the Surge Shares may decline;
AOC and Surge expect to incur significant costs associated with the Arrangement;
if the Arrangement is not completed, AOC’s future business and operations could be harmed and AOC may be required to pay the AOC Termination Amount to Surge under certain circumstances;
if the Arrangement is not completed, Surge’s future business and operations could be harmed and Surge may be required to pay the Surge Termination Fee to AOC under certain circumstances;
actual production and ultimate reserves could be greater or lesser than the production forecast and reserve estimates contained in the AOC Reserve Report and Surge Reserve Report;
future reserves and production depend on success in exploring the current reserves and acquiring or discovering additional reserves;
failure to realize anticipated benefits of other acquisitions or dispositions;
general economic conditions of Canada and the United States and globally;
industry conditions, including commodity price volatilities and other factors that may affect the marketability of oil, natural gas and NGLs;
the Surge Shares issued in connection with the Arrangement may have a market value that is different than expected;
no cash dividends are expected to be paid on the Surge Shares in the foreseeable future; and
there are risks related to the integration of AOC’s and Surge’s existing businesses.

There are additional risk factors contained elsewhere or incorporated by reference in this Information Circular. See “ Risk Factors – Risk Factors Related to the Arrangement ”. AOC Shareholders and Surge Shareholders should carefully consider all such risk factors.

Procedure for Exchange of AOC Shares

The AOC Letter of Transmittal, printed on yellow paper, has been sent to registered AOC Shareholders with this Information Circular. The AOC Letter of Transmittal sets out the procedure to be followed by AOC Shareholders to deposit their AOC Shares. If the Arrangement

becomes effective, in order to receive the Surge Shares to which the AOC Shareholder is entitled under the Plan of Arrangement in exchange for the holder’s AOC Shares, an AOC Shareholder must deliver the AOC Letter of Transmittal, properly completed and duly executed, together with certificate(s) representing its AOC Shares and all other required documents to the Depositary at the address set forth in the AOC Letter of Transmittal. It is each AOC Shareholder’s responsibility to ensure that the AOC Letter of Transmittal is received by the Depositary. If the Arrangement is not completed, the AOC Letter of Transmittal will be of no effect and the Depositary will return all certificate(s) representing the AOC Shares to the holders thereof as soon as practicable at the address specified in the AOC Letter of Transmittal.

AOC Shareholders whose AOC Shares are registered in the name of an Intermediary, which may include a broker, investment dealer, bank, trust company, nominee or other Intermediary, must contact their Intermediary for instruction to make an election and to deposit their AOC Shares.

Subject to any Applicable Laws relating to unclaimed personal property, any certificate formerly representing AOC Shares that is not deposited with all other documents as required by the Plan of Arrangement and the AOC Letter of Transmittal on or before the last Business Day prior to the third anniversary of the Effective Date will cease to represent a right or claim of any kind or nature, including the right of the AOC Shareholder to receive the Consideration. In such case, the applicable Surge Shares (together with all dividends or other distributions thereon) will be returned to Amalco and such Surge Shares will be cancelled.

AOC Shareholders are encouraged to deliver a properly completed and duly executed AOC Letter of Transmittal together with the relevant certificate(s) representing the AOC Shares and any other required documents to the Depositary prior to the Effective Date.

The use of mail to transmit certificates representing AOC Shares and the AOC Letter of Transmittal is at each holder’s risk. AOC recommends that such certificates and documents be delivered by hand to the Depositary and a receipt therefor be obtained or that registered mail be used and appropriate insurance be obtained.

In the event AOC Shareholders have not received an AOC Letter of Transmittal due to a postal disruption as a result of a Canada Post labour disruption or other cause, copies of the AOC Letter of Transmittal may be obtained by contacting the Depositary. In the event of a postal disruption, AOC recommends that AOC Shareholders deposit with the Depositary certificates representing their AOC Shares together with the AOC Letter of Transmittal and other required documents either: (i) by hand and receipt therefor obtained; or (ii) by courier (other than Canada Post) and the appropriate insurance be obtained, to ensure such deposit is not be delayed by the Canada Post disruption.

Assuming completion of the Surge Share Consolidation as set forth in this Information Circular, AOC Shareholders will not be required to take any further action to obtain the Surge Shares that they are entitled to receive pursuant to the Surge Share Consolidation (other than the completion and delivery of the AOC Letter of Transmittal in accordance with the instructions set forth therein).

The Depositary will receive reasonable and customary compensation from Surge for its services in connection with the Arrangement, will be reimbursed for certain out of pocket expenses and will be indemnified against certain liabilities, including liability under securities laws and expenses in connection therewith.

For additional information, see “ The Arrangement – Procedure for Exchange of Securities ”.

AOC Shareholder Approval

Pursuant to the terms of the Interim Order and Applicable Securities Laws, the AOC Arrangement Resolution must, subject to further orders of the Court, be approved by not less than 66[2] ⁄3% of the votes cast by the AOC Shareholders, present in person or by proxy at the AOC Meeting.

See Appendix A to this Information Circular for the full text of the AOC Arrangement Resolution. See also “ The Arrangement – AOC Shareholder Approval ”.

Surge Shareholder Approval

Surge Issuance Resolution

non-diluted basis. The foregoing number includes: (i) 215,892,581 Surge Shares to be issued to former holders of AOC Shares; (ii) 10,379,688 Surge Shares issuable to the former holders of AOC Options which assumes that an additional 3,269,605 AOC Shares are issued from treasury pursuant to the “cashless exercise” of outstanding AOC Options prior to the Effective Time; (iii) 2,619,048 Surge Shares issuable to the former holders of AOC Warrants which assumes that an additional 825,001 AOC Shares are issued from treasury pursuant to the “cashless exercise” of outstanding AOC Warrants prior to the Effective Time; and (iv) an additional 108,683 Surge Shares that could be required to be issued to account for clerical and administrative matters, including to settle fractional entitlements. The Arrangement is not expected to materially affect the control of Surge.

See Appendix B-1 to this Information Circular for the full text of the Surge Issuance Resolution. See also “ The Arrangement – Surge Shareholder Approval ”. See also “ Information Concerning Surge Following Completion of the Arrangement – Principal Shareholders of Surge Shares Following the Arrangement ”.

Surge Share Consolidation Resolution

The Surge Share Consolidation Resolution is conditional on the approval of the Surge Issuance Resolution and must be approved by not less than 66[2] ⁄3% of the votes cast by the Surge Shareholders, present in person or by proxy at the Surge Meeting. Completion of the Arrangement is not conditional on approval of the Surge Share Consolidation Resolution.

See Appendix B-2 to this Information Circular for the full text of the Surge Share Consolidation Resolution. See also “ The Arrangement – Surge Shareholder Approval ” and “ Matters to be Acted Upon at the Meeting – Surge Share Consolidation ”.

Surge Credit Facilities

In connection with the Arrangement, Surge has entered into an agreement in principle with its lending syndicate to amend and extend the Surge Credit Facilities. This agreement provides that, concurrent with the closing of the Arrangement, Surge’s fully conforming first lien revolving credit facilities will be set at $215 million and the maturity date will be extended from July 1, 2022 to November 30, 2022, with the next bank review scheduled to be on or before November 30, 2021.

See “ Risk Factors ” in the Information Circular.

AOC Fairness Opinion

AOC engaged NBF as financial advisor in connection with AOC’s strategic review, which mandate also included acting as financial advisor with respect to the Arrangement and providing the AOC Fairness Opinion. The AOC Board received the AOC Fairness Opinion from NBF which states that, in the opinion of NBF, as of the date of the AOC Fairness Opinion and based upon and subject to the assumptions, limitations, qualifications and other matters stated in the AOC Fairness Opinion, the Consideration to be received by AOC Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the AOC Shareholders. The AOC Fairness Opinion is subject to the assumptions, qualifications and limitations contained therein and should be read in its entirety. A complete copy of the AOC Fairness Opinion is attached as Appendix F to this Information Circular.

NBF provided the AOC Fairness Opinion to the AOC Board for its exclusive use in considering the Arrangement. While the AOC Fairness Opinion is being included in this Information Circular for the information and review of AOC Shareholders, the AOC Fairness Opinion may not be relied upon by any other Person other than the AOC Board. The AOC Fairness Opinion does not address the relative merits of the Arrangement as compared to any other strategic alternatives that may be available to AOC and the AOC Fairness Opinion does not constitute a recommendation to any AOC Shareholder as to how such AOC Shareholder should act or vote on any matters relating to the Arrangement.

The summary of the AOC Fairness Opinion in this Information Circular is qualified in its entirety by reference to the full text of the AOC Fairness Opinion. The AOC Fairness Opinion is subject to the various assumptions, qualifications and limitations contained therein and should be read in its entirety.

See “ The Arrangement – AOC Fairness Opinion ”.

Final Order

Completion of the Arrangement is subject to the satisfaction of several conditions and the approval of the Court. Subject to the terms of the Arrangement Agreement, if the AOC Arrangement Resolution and Surge Issuance Resolution are approved by the requisite majorities at the respective Meetings, AOC will make application to the Court for the Final Order at the Calgary Courts Centre, 601 - 5 Street S.W., Calgary, Alberta Canada, or via video conference, on August 17, 2021 at 2:00 p.m. (Calgary time) or as soon thereafter as counsel may be heard. See “ The Arrangement – Court Approval ”.

Dissent Rights

AOC Dissent Rights

Pursuant to the Interim Order, registered AOC Shareholders have the right to dissent with respect to the AOC Arrangement Resolution by providing a written objection to the AOC Arrangement Resolution to AOC, c/o Burnet, Duckworth & Palmer LLP, Suite 2400, 525 – 8th Avenue S.W., Calgary, Alberta T2P 1G1, Attention: Ryan Algar, to be received by no later than 8:30 a.m. (Calgary time) on the second Business Day immediately preceding the date of the AOC Meeting.

In the event the Arrangement becomes effective, each AOC Shareholder who properly dissents and becomes a Dissenting AOC Shareholder will be entitled to be paid by Surge the fair value of the AOC Shares in respect of which such holder dissents in accordance with Section 191 of the ABCA, as modified by the Plan of Arrangement and the Interim Order. An AOC Shareholder who votes in favour of the Arrangement shall not be entitled to dissent. A Dissenting AOC Shareholder may dissent only with respect to all of the AOC Shares held by such Dissenting AOC Shareholder. See Appendix E, Exhibit “A” to Appendix D and Appendix I for a copy of the Interim Order, the Plan of Arrangement and the provisions of Section 191 of the ABCA, respectively.

The statutory provisions covering the right to dissent are technical and complex. Failure to strictly comply with such requirements set forth in Section 191 of the ABCA, as modified by the Plan of Arrangement and the Interim Order, may result in the loss of any right to dissent . A Beneficial Shareholder of AOC Shares registered in the name of an Intermediary , which may include a broker, investment dealer, bank, trust company, nominee or other intermediary, who wishes to dissent should be aware that only the Registered Holder of such AOC Shares is entitled to dissent . Accordingly, a Beneficial Shareholder of AOC Shares desiring to exercise AOC Dissent Rights must make arrangements for such beneficially owned AOC Shares to be registered in such holder’s name prior to the time the written objection to the AOC Arrangement Resolution is required to be received by AOC or, alternatively, make arrangements for the Registered Holder of such AOC Shares to dissent on such Beneficial Shareholder’s behalf. Pursuant to Section 191 of the ABCA, an AOC Shareholder is only entitled to dissent in respect of all of the AOC Shares held by such Dissenting AOC Shareholder or on behalf of any one Beneficial Shareholder and registered in the name of the Dissenting AOC Shareholder.

Unless otherwise waived, it is a condition to the completion of the Arrangement that the aggregate number of AOC Shares held by AOC Shareholders who have validly exercised and not withdrawn Dissent Rights shall not exceed 5% of the AOC Shares outstanding as of the Effective Date.

See “ The Arrangement – AOC Dissent Rights ” and “ The Arrangement – The Arrangement Agreement – Conditions of Closing ”.

Stock Exchange Approvals

The AOC Shares are not listed on any exchange. The Surge Shares are listed on the TSX under the trading symbol “SGY”.

It is a mutual condition to the completion of the Arrangement that the Surge Shares to be issued to the AOC Shareholders pursuant to the Arrangement are conditionally approved for listing on the TSX. The TSX has conditionally accepted the listing of Surge Shares to be issued pursuant to the Arrangement and the Surge Share Consolidation in its letter dated July 13, 2021. The listing of Surge Shares will be subject to Surge fulfilling all of the listing requirements of the TSX.

See “ The Arrangement – Surge Shareholder Approval ” and “ The Arrangement – Stock Exchange Approval ”.

Certain Canadian Federal Income Tax Considerations

Certain Canadian federal income tax considerations for AOC Shareholders who participate in the Arrangement or who dissent from the Arrangement are set out in the summary herein entitled “ Certain Canadian Federal Income Tax Considerations in Respect of the Arrangement ”.

Certain Other Tax Considerations

This Information Circular does not address any tax considerations of the Arrangement other than certain Canadian income tax considerations applicable to AOC Shareholders. AOC Shareholders who are resident in or otherwise subject to taxation in jurisdictions other than Canada should consult their tax advisors with respect to the tax implications of the Arrangement, including any associated filing requirements, in such jurisdictions and with respect to the tax implications in such jurisdictions of owning Surge Shares after the completion of the Arrangement. AOC Shareholders should also consult their own tax advisors regarding provincial, state or territorial tax considerations of the Arrangement or of holding Surge Shares.

MATTERS TO BE ACTED UPON AT THE AOC MEETING

The principal purpose of the AOC Meeting is for AOC Shareholders to consider and, if thought advisable, approve, with or without amendment, the AOC Arrangement Resolution. The full text of the AOC Arrangement Resolution is set forth in Appendix A of this Information Circular.

On any ballot that may be called for at the AOC Meeting, the Persons named in the enclosed instrument of proxy, if named as proxy, intend to vote for the AOC Arrangement Resolution, unless an AOC Shareholder has specified in its instrument of proxy that its AOC Shares are to be voted against the AOC Arrangement Resolution. If no choice is specified by an AOC Shareholder to vote either for or against the AOC Arrangement Resolution, the Persons whose names are printed in the enclosed instrument of proxy intend to vote for the AOC Arrangement Resolution.

MATTERS TO BE ACTED UPON AT THE SURGE MEETING

Surge Share Issuance

At the Surge Meeting, Surge Shareholders will be asked to consider and, if thought advisable, approve, with or without amendment, the Surge Issuance Resolution. The full text of the Surge Issuance Resolution is set forth in Appendix B-1 of this Information Circular.

An aggregate of up to 229,000,000 Surge Shares are potentially issuable pursuant to the Arrangement, representing approximately 60% of the currently issued and outstanding Surge Shares on a non-diluted basis. The foregoing number includes approximately: (i) 215,892,581 Surge Shares to be issued to former holders of AOC Shares; (ii) 10,379,688 Surge Shares issuable to the former holders of AOC Options which assumes that an additional 3,269,605 AOC Shares are issued from treasury pursuant to the “cashless exercise” of outstanding AOC Options prior to the Effective Time; (iii) 2,619,048 Surge Shares issuable to the former holders of AOC Warrants which assumes that an additional 825,001 AOC Shares are issued from treasury pursuant to the “cashless exercise” of outstanding AOC Warrants prior to the Effective Time; and (iv) an additional 108,683 Surge Shares that could be required to be issued to account for clerical and administrative matters, including to settle fractional entitlements. The Arrangement is not expected to materially affect the control of Surge.

If the Surge Issuance Resolution is not approved by Surge Shareholders at the Surge Meeting, the Arrangement will not be completed.

Surge Share Consolidation

At the Surge Meeting, conditional upon the Surge Issuance Resolution being approved at the Surge Meeting, Surge Shareholders will be asked to consider and, if thought advisable, to pass, with or without variation, the Surge Share Consolidation Resolution, the full text of which is set forth in Appendix B-2 to this Information Circular, approving the amendment to the articles of Surge to effect a consolidation of the Surge Shares, following the Effective Time, on the basis of one (1) post-consolidation Surge Share for 8.5 pre-consolidation Surge Shares.

The completion of the Arrangement is not conditional upon the approval of the Surge Share Consolidation Resolution at the Surge Meeting. Should the Surge Share Consolidation Resolution not be approved by the Surge Shareholders, the AOC Shares will still be exchanged for Surge Shares in accordance with the terms of the Arrangement Agreement.

Principal Reasons for Effecting the Surge Share Consolidation

As at July 15, 2021, the last trading day prior to the date of this Information Circular, the closing price of the Surge Shares on the TSX was $0.60.

Surge’s management believes that the current market price and trading volumes of the Surge Shares generally impairs Surge’s marketability and acceptance by institutional investors and other members of the investing public. Theoretically, decreasing the number of Surge Shares outstanding should not, by itself, affect the marketability of the Surge Shares, the type of investor who would be interested in acquiring them, or Surge’s reputation in the financial community. In practice, however, many investors and market-makers consider lower-priced shares as unduly speculative in nature and, as a matter of policy, avoid investment and trading in such shares. The presence of these negative perceptions may adversely affect not only the pricing of the Surge Shares but also the trading liquidity. These perceptions may also affect Surge’s commercial business and, in addition to certain policies of the TSX, Surge’s ability to raise additional capital through equity and debt financings.

As an added benefit, if Surge were successful in raising the per-share trading price of the Surge Shares, investors could potentially incur lower transaction costs trading in the Surge Shares. Investors tend to pay commissions based on the number of shares traded, meaning commissions on lower-priced shares generally represent a higher percentage of the share price than commissions on higher-priced shares. As a result, investors in lower-priced shares pay transaction costs which are a higher percentage of their total value. Reduced transaction costs relating to the Surge Shares may generate additional investor interest in the Surge Shares.

In determining whether to seek approval to effect the Surge Share Consolidation, the Surge Board also considered a number of other market and business factors deemed relevant by the Surge Board, including, but not limited to potential business and strategic alternatives that may have been available to Surge as well as general stock market and economic conditions.

Principal Effects of the Surge Share Consolidation

As at the date hereof, Surge has 379,594,375 Surge Shares issued and outstanding and upon completion of the Arrangement, Surge is expected to have approximately 608,485,692 Surge Shares issued and outstanding. Following the Surge Share Consolidation, and assuming the Surge Share Consolidation proceeds on the basis of one (1) post-consolidation Surge Share for 8.5 pre-consolidation Surge Shares, the number of postconsolidation Surge Shares issued and outstanding will be approximately 71,586,552 (on a non-diluted basis). See “ Information Concerning Surge Following Completion of the Arrangement – Pro Forma Capitalization ”.

The implementation of the Surge Share Consolidation would not affect the total shareholders’ equity of Surge or any components of shareholders’ equity as reflected on Surge’s financial statements except: (i) to change the number of issued and outstanding Surge Shares; and (ii) to adjust the conversion ratio for Surge’s outstanding convertible debentures; and (iii) to change the number of outstanding share awards of Surge, as well as their relative exercise prices, to reflect the Surge Share Consolidation.

The Surge Share Consolidation will not materially change any Surge Shareholder’s proportion of votes to total votes; however, if the Surge Share Consolidation is effected, the total number of votes that a Surge Shareholder may cast at any future meeting of Surge Shareholders will be reduced.

Any fractional Surge Share resulting from the Surge Share Consolidation will be rounded down to the nearest whole number and any such fractional interest will be cancelled without consideration.

The Surge Share Consolidation will not reduce the aggregate number of Surge Shares to be issued under the Arrangement, however, such Surge Shares will be subsequently consolidated together with the other Surge Shares such that on a post-consolidation basis AOC Shareholders will receive approximately 0.3735 Surge Shares for each AOC Share formerly held (representing approximately 0.1176 Surge Shares for each Surge Share to be issued under the Arrangement). It is currently anticipated that the Surge Share Consolidation will occur immediately following the occurrence of the Effective Time and that AOC Shareholders will not be required to take any further action to obtain the Surge Shares that they are entitled to receive pursuant to the Surge Share Consolidation (other than the completion and delivery of the AOC Letter of Transmittal in accordance with the instructions set forth therein).

Procedure for Exchange of Surge Share Certificates

Following an announcement of an effective date of the Surge Share Consolidation (if any), in order to obtain a certificate or DRS Statement representing the post-consolidation Surge Shares, registered Surge Shareholders must duly complete and return a Surge Letter of Transmittal together with the certificate(s) representing their Surge Shares and all other required documents to the Transfer Agent at one of the offices specified in the Surge Letter of Transmittal.

Enclosed with this Information Circular is a Surge Letter of Transmittal which, when properly completed and returned together with the certificate(s) representing Surge Shares and all other required documents, will enable each Surge Shareholder to obtain certificates representing their post-consolidation Surge Shares under the Surge Share Consolidation.

The Surge Letter of Transmittal contains complete instructions on how to exchange pre-consolidation Surge Shares for post-consolidation Surge Shares. From and after the effective time of the Surge Share Consolidation, certificates formerly representing Surge Shares shall represent only the post-consolidation Surge Shares holders are entitled to pursuant to the Surge Share Consolidation. As soon as practicable following the deposit by a former holder of Surge Shares of a duly completed Surge Letter of Transmittal, and the certificates representing such Surge Shares and all other required documents, the Transfer Agent shall either: (a) e-mail; (b) forward by first class mail to such former holder at the address specified in the Surge Letter of Transmittal; or (c) if requested by such Surge Shareholder in the Surge Letter of Transmittal, make available or cause to be made available at the Transfer Agent for pickup by such Surge Shareholder, one or more DRS Statements representing the number of Surge Shares issued to such Surge Shareholder under the Surge Share Consolidation.

No DRS Statements representing fractional Surge Shares will be issued pursuant to the Surge Share Consolidation. In the event that a Surge Shareholder would otherwise be entitled to a fractional Surge Share thereunder, the number of Surge Shares issued to such Surge Shareholder shall, without any additional compensation, be rounded down to the next lesser whole number of Surge Shares. In calculating such fractional interests, all Surge Shares registered in the name of a Surge Shareholder or its nominee shall be aggregated.

Subject to any Applicable Laws relating to unclaimed personal property, registered Surge Shareholders who do not deliver their Surge Share certificates representing pre-consolidation Surge Shares and all other required documents to the Transfer Agent on or before the sixth anniversary of the effective date of the Surge Share Consolidation will lose their rights to receive post-consolidation Surge Shares in exchange for their existing pre-consolidation Surge Shares.

The use of mail to transmit certificates representing Surge Shares or the Surge Letter of Transmittal is at each registered Surge Shareholder’s risk. Surge recommends that such certificates and documents be delivered by hand to the Transfer Agent and a receipt therefor be obtained or that registered mail be used and appropriate insurance be obtained.

If a Surge Letter of Transmittal is executed by a person other than the registered holder of the Surge Shares being exchanged or if the DRS Statement(s) representing Surge Shares are to be issued in exchange therefor are to be issued to a person other than the registered owner(s) or sent to an address other than the address of the registered holder(s) as shown on the register of Surge Shareholders maintained by the Transfer Agent, the signature on the Surge Letter of Transmittal must be medallion guaranteed by an Eligible Institution (as defined in the Surge Letter of Transmittal). If the Surge Letter of Transmittal is executed by a person other than the registered owner(s) of the Surge Shares and in certain other circumstances as set forth in the applicable Surge Letter of Transmittal, then the certificate(s) representing the Surge Shares must be endorsed or be accompanied by an appropriate transfer power of attorney duly and properly completed by the registered owner(s). The signature(s) on the endorsement panel or the transfer power of attorney must correspond exactly to the name(s) of the registered owner(s) as registered or as appearing on the certificate(s) or must be medallion guaranteed by an Eligible Institution.

All questions as to validity, form, eligibility (including timely receipt), and acceptance of any Surge Shares exchanged pursuant to the Surge Share Consolidation will be determined by Surge in its sole discretion. Depositing Surge Shareholders agree that such determination shall be final and binding. Surge reserves the absolute right to reject any and all deposits which it determines not to be in proper form or which may be unlawful for it to accept under the laws of any jurisdiction. Surge reserves the absolute right to waive any defect or irregularity in the exchange of pre-consolidation Surge Shares. There shall be no duty or obligation on Surge, the Transfer Agent or any other person to give notice of any defect or irregularity in any deposit of pre-consolidation Surge Shares and no liability shall be incurred by any of them for failure to give such notice.

Should the Surge Share Consolidation not be completed, any deposited Surge Share will be returned to the depositing Surge Shareholder at Surge’s expense by returning the deposited Surge Shares (and any other relevant documents) by first class insured mail in the name of and to the address specified by the Surge Shareholder in the Surge Letter of Transmittal or, if no such name and address is specified, in such name and to such address as shown on the register maintained by the Transfer Agent.

Notwithstanding the provisions of this Information Circular and the Surge Letter of Transmittal, DRS Statements representing Surge Shares representing the consideration to be received pursuant to the Surge Share Consolidation will not be mailed if Surge determines that delivery thereof by mail may be delayed. Persons entitled to DRS Statements which are not mailed for such reason may take delivery thereof at the office of the Transfer Agent in which the deposited certificates or DRS Advices representing Surge Shares were originally deposited until such time that it is determined that the delivery by mail will no longer be delayed. Surge Shareholders are encouraged to deliver a validly completed and duly executed Surge Letter of Transmittal, as applicable, together with the relevant security certificate(s) to the Transfer Agent as soon as possible following an announcement of an effective date of the Surge Share Consolidation (if any).

Neither Surge nor the Transfer Agent are liable for failure to notify Surge Shareholders, nor do they have any obligation to notify Surge Shareholders, who make a deficient deposit with the Transfer Agent.

Only registered Surge Shareholders or the persons they appoint as their proxies are required to complete, sign and submit the appropriate Surge Letter of Transmittal as described above. Non-registered Surge Shareholders are not required to submit a Surge Letter of Transmittal. The Intermediary or clearing agency through whom the non-registered Surge Shareholder holds the pre-consolidation Surge Shares will take the appropriate steps to ensure the holder’s accounts are adjusted to reflect the exchange ratio, as applicable. Surge Shareholders whose Surge Shares are registered in the name of an Intermediary, which may include a broker, dealer, bank, trust company or other nominee, must contact such Intermediary to deposit their Surge Shares.

Assuming completion of the Surge Share Consolidation as set forth in this Information Circular, AOC Shareholders will not be required to take any further action to obtain the Surge Shares that they are entitled to receive pursuant to the Surge Share Consolidation (other than the completion of the AOC Letter of Transmittal as set forth herein and therein).

Lost Securities

If any certificate which immediately prior to the effective time of the Surge Share Consolidation represented an interest in one or more outstanding pre-consolidation Surge Shares has been lost, stolen or destroyed, upon satisfying such reasonable requirements as may be imposed by Surge and the Transfer Agent in relation to the issuance of replacement share certificates, the Transfer Agent will issue and deliver in exchange for such lost, stolen or destroyed certificate the post-consolidation Surge Shares to which the holder is entitled pursuant to the Surge Share Consolidation (and any dividends or distributions with respect thereto), deliverable in accordance with such holder’s Surge Letter of Transmittal. The Person who is entitled to receive such consideration shall, as a condition precedent to the receipt thereof, give a bond satisfactory to each of Surge and the Transfer Agent in such form as is satisfactory to Surge and the Transfer Agent, or shall otherwise indemnify Surge and the Transfer Agent, to the reasonable satisfaction of such parties, against any claim that may be made against any of them with respect to the certificate alleged to have been lost, stolen or destroyed.

Effect on Surge Share Certificates

Notwithstanding a Surge Shareholder’s failure to exchange its share certificates representing pre-consolidation Surge Shares for postconsolidation Surge Shares, or any delay in doing so, following an announcement of an effective date of the Surge Share Consolidation (if any) and until surrendered, each Surge Share certificate representing pre-consolidation Surge Shares will be deemed for all purposes to represent the number of post-consolidation Surge Shares to which the holder is entitled as a result of the Surge Share Consolidation up until the date that is six years following the date of the Surge Share Consolidation at which point all rights under the Surge Share Consolidation are forfeit, in accordance with the terms outlined in the Surge Letter of Transmittal. In addition, after the exchange of pre-consolidation Surge Share certificates for post-consolidation Surge Share certificates, Surge Shareholders will have no further interest with respect to any fractional postconsolidated Surge Shares.

No Dissent Rights

Under the ABCA, Surge Shareholders do not have any dissent and appraisal rights with respect to the proposed Surge Share Consolidation. If Surge implements the Surge Share Consolidation, Surge will not independently make such rights available to Surge Shareholders.

General

On any ballot that may be called for at the Surge Meeting, the Persons named in the enclosed instrument of proxy, if named as proxy, intend to vote for the Surge Issuance Resolution and, if applicable, the Surge Share Consolidation Resolution, unless a Surge Shareholder has specified in its instrument of proxy that its Surge Shares are to be voted against the Surge Issuance Resolution or the Surge Share Consolidation Resolution. If no choice is specified by a Surge Shareholder to vote either for or against the Surge Issuance Resolution or the Surge Share Consolidation Resolution, the Persons whose names are printed in the enclosed instrument of proxy intend to vote for the Surge Issuance Resolution and the Surge Share Consolidation Resolution.

THE ARRANGEMENT

Background to and Reasons for the Arrangement

Background to the Arrangement

The terms of the Arrangement are the result of arm’s length negotiations between representatives of AOC and Surge. The following is a summary of the events leading up to the negotiation of the Arrangement Agreement and the key meetings, negotiations, discussions and actions by and between the Parties that preceded the execution and public announcement of the Arrangement Agreement.

AOC Process

Management of AOC and the AOC Board regularly evaluate AOC’s business plan and strategy and, in such context, review and discuss the strategic objectives, alternatives and opportunities available to AOC as part of their respective ongoing responsibility to enhance the value of AOC. In that regard, AOC has from time to time considered and assessed strategic transactions with various industry participants and other opportunities to better realize the potential of AOC’s asset portfolio, support and grow AOC’s overall position in the industry and enhance shareholder value, including access to improved shareholder liquidity. Beginning in early 2021, AOC began to allocate additional time at meetings of the AOC Board to discuss the evaluation of business development opportunities, with an increased focus on reviewing and evaluating strategic transactions.

Concurrent with AOC’s assessment of certain asset and corporate acquisition opportunities, AOC also began engaging in confidential preliminary conceptual discussions with a number of other exploration and production companies regarding potential transactions or mergers with the intent of completing a transaction that would be accretive across a variety of metrics.

In early April 2021, senior management of AOC met with senior management of Surge to discuss each company’s strategic outlook. Based on these initial discussions AOC and Surge entered into a confidentiality agreement on April 16, 2021.

Following execution of the confidentiality agreement, Surge commenced extensive due diligence on the financials, business, operations and assets of AOC and engaged in further preliminary conceptual discussions with management of AOC. During this time, AOC approached NBF to advise AOC on a potential transaction with Surge and to advise on what other strategic alternative may be available to AOC.

AOC subsequently retained NBF and, beginning on April 30, 2021, representatives of AOC management, the AOC Board and NBF met regularly to discuss AOC’s existing business prospects and financial outlook, as well as the financial analysis that NBF was requested to prepare for a potential business combination of AOC and Surge. To address its objectives and based on advice from NBF, AOC’s management and the AOC Board determined that a broad review of strategic alternatives would provide the best opportunity to maximize value and liquidity for AOC Shareholders.

Upon commencement of the strategic review process, AOC and National Bank prepared and made a corporate data room available for review by interested parties upon execution of a confidentiality agreement. Through the process, NBF approached approximately six third parties in Canada, to determine their interest in considering a wide variety of potential transactions with AOC resulting in three parties, including Surge, entering into confidentiality agreements and reviewing confidential information relating to AOC in the data room.

During this time, management of AOC provided technical presentations to all three third parties and entered into reciprocal confidentiality agreements with certain third parties to determine AOC’s interest in pursuing a transaction with such parties.

Throughout the week of May 17, 2021, interested parties, including Surge, submitted non-binding proposals for various alternative transactions between such parties and AOC. AOC management had several discussions with AOC Board members to assess the merits and terms of such proposals, including the proposal from Surge. AOC management directed NBF to go back to the interested parties who had submitted proposals, including Surge, to refine certain details of their proposals.

On May 26, 2021, interested third parties, including Surge, re-submitted non-binding proposals and on May 26, 2021, the AOC Board met to review and discuss the financial terms of, and other considerations relating to, the various proposals received. In addition, AOC and its advisors reviewed, among other things, (i) information concerning the business, operations, assets, financial condition, operating results and prospects of each of AOC and the parties who had submitted proposals; (ii) industry forecasts regarding the prices and price trends of oil, natural gas and natural gas liquids; (iii) the expected benefits of the various proposals for AOC and its stakeholders, including the AOC Shareholders; (vi) the risks associated with the completion and non-completion of the various alternatives; and (vii) updates on other alternatives available to AOC. Following review and consideration of the proposals, the AOC Board determined that the transaction with Surge was the preferred transaction available to AOC and the AOC Shareholders and that further discussion and negotiation was warranted. Management of AOC was directed to respond to the Surge proposal on certain items.

On May 27, 2021, Surge submitted a revised proposal to AOC. On May 27, 2021, the AOC Board convened to consider the revised proposal. Following the AOC Board meeting, management was instructed to continue negotiations regarding certain points contained in the revised proposal. Between May 27 and May 28, 2021, AOC and Surge, and their respective advisors, further negotiated the terms of proposal.

On May 28, 2021, the AOC Board met to consider the most recent proposal from Surge. Following this meeting the AOC Board determined to proceed with the negotiation of a definitive agreement with Surge in respect of the proposed arrangement.

During the period between May 29, 2021 and June 22, 2021, AOC and Surge, and their respective advisors, negotiated the terms and conditions of the Arrangement Agreement.

On June 21 and June 22, 2021, the AOC Board met to consider and, if thought appropriate, to approve the Arrangement Agreement. At the AOC Board meeting on June 22, 2021, NBF confirmed and delivered its oral opinion to the AOC Board that, as of June 22, 2021 and based upon and subject to certain assumptions, limitations and qualifications set forth therein, the consideration to be received by AOC Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the AOC Shareholders.

In connection with the Arrangement, the AOC Board considered, among other things: (i) the oral fairness opinion delivered by NBF; (ii) the advice of its legal counsel; (iii) that AOC Shareholders will gain access to liquidity while at the same time continue to participate in the oil and gas prospects of AOC while gaining exposure to a larger base of existing production and the prospect inventory of Surge; (iv) the historical market price, recent trading patterns and financial information relating to other companies engaged in the same business as AOC; and (E) the risks associated with completing the Arrangement.

The AOC Board unanimously: (i) determined that the Arrangement is in the best interests of AOC; (ii) determined that the Arrangement is fair to the AOC Shareholders; (iii) approved the Arrangement and the entering into of the Arrangement Agreement; and (iv) resolved to recommend that AOC Shareholders vote in favour of the AOC Arrangement Resolution.

On June 22, 2021, the Arrangement Agreement and the AOC Support Agreements were executed and delivered. Thereafter, a joint news release of AOC and Surge announcing the proposed Arrangement was disseminated in the evening of June 22, 2021.

On July 15, 2021, the Court granted the Interim Order which is attached as Appendix E to this Information Circular.

Effective July 16, 2021 and July 15, 2021, the AOC Board and the Surge Board, respectively, each approved the contents and mailing of this Information Circular to AOC Shareholders and Surge Shareholders, and respectively ratified their recommendations to AOC Shareholders and Surge Shareholders with respect to the Arrangement.

Surge Process

Management of Surge continually evaluates opportunities for enhancing Surge Shareholder value. As a result of this continual process, management of Surge entered into a confidentiality agreement with AOC on April 16, 2021 and began to review the confidential information provided by AOC to Surge in respect of a potential transaction with AOC. On May 12, 2021, Surge contacted Scotiabank with regards to Scotiabank acting as financial advisor to Surge for a potential transaction with AOC.

Management of Surge, with the support of Scotiabank, conducted an initial due diligence on the financials, business, operations and assets of AOC and engaged in further preliminary conceptual discussions with management of AOC. As part of this due diligence review, over the course of several meetings and discussions, Scotiabank provided Surge management with a detailed review of the strategic benefits and considerations for a transaction with AOC, including an assessment of financial performance, asset quality and strategic fit.

On May 17, 2021, Surge submitted a non-binding proposal to AOC for a business combination between the two parties. Following the submission of Surge’s non-binding proposal, NBF, on behalf of AOC, approached Surge management and indicated AOC’s interest in pursuing a potential transaction with Surge and invited Surge to submit a revised proposal based on their discussions. During the period from May 26 to May 28, 2021, Surge submitted further non-binding proposals to AOC with respect to a proposed transaction between the parties. Management of Surge advised the Surge Board of the potential transaction between the parties on May 26, 2021.

On May 28, 2021, Surge and AOC entered into a non-binding letter of intent in respect of a potential business combination between the parties. The letter of intent provided for an exclusivity period in favour of Surge until June 22, 2021. During the exclusivity period, Surge, with the assistance of its financial and legal advisors, conducted further due diligence on the financials, business, operations and assets of AOC.

During the period between May 29, 2021 and June 22, 2021, AOC and Surge, and their respective advisors, completed due diligence and negotiated the terms and conditions of the Arrangement Agreement and AOC Support Agreements.

On June 22, 2021, the Surge Board met and received (i) a detailed presentation by management of Surge on the proposed transaction; and (ii) financial advice from Scotiabank in respect of the Arrangement. The terms and conditions of the proposed Arrangement Agreement and the various risks associated with the potential transaction were reviewed with Surge’s legal counsel, McCarthy Tétrault. At the conclusion of the meeting, the Surge Board unanimously: (i) determined that the Arrangement is in the best interests of Surge; (ii) approved the Arrangement and the entering into of the Arrangement Agreement; and (iii) resolved to recommend that Surge Shareholders vote in favour of the Surge Issuance Resolution.

On June 22, 2021, the Arrangement Agreement and the AOC Support Agreements were executed and delivered. Thereafter, a joint news release of Surge and AOC announcing the proposed Arrangement was disseminated in the evening of June 22, 2021.

On July 15, 2021, the Court granted the Interim Order which is attached as Appendix E to this Information Circular.

Effective July 16, 2021, the Surge Board approved the contents and mailing of this Information Circular to the Surge Shareholders and ratified its recommendation to Surge Shareholders with respect to the Arrangement.

Entering into the Arrangement Agreement and Subsequent Steps

The negotiation of the definitive terms and conditions of the Arrangement Agreement and Plan of Arrangement was subsequently completed and the Arrangement Agreement was executed on June 22, 2021. Surge issued a news release on June 22, 2021 announcing the entering into of the Arrangement Agreement.

On July 15, 2021, the Court granted the Interim Order as attached as Appendix E to this Information Circular.

On July 16, 2021, the AOC Board approved the contents and mailing of this Information Circular to AOC Shareholders, subject to any amendments that may be approved by AOC’s senior management team and ratified the recommendation to AOC Shareholders with respect to the Arrangement. On July 15, 2021, the Surge Board approved the contents and mailing of this Information Circular to Surge Shareholders, subject to any amendments that may be approved by Surge’s senior management team and ratified the recommendation to Surge Shareholders with respect to the Arrangement.

Reasons for the Arrangement

AOC Board

Following receipt of the advice and assistance of its financial advisors and legal counsel, the AOC Board carefully evaluated the terms of the proposed Arrangement and based upon, among other things, the AOC Fairness Opinion, unanimously: (i) determined that the Arrangement is in the best interests of AOC; (ii) determined that the Arrangement is fair to the AOC Shareholders; (iii) approved the Arrangement and the entering into of the Arrangement Agreement; and (iv) resolved to recommend that AOC Shareholders vote in favour of the AOC Arrangement Resolution.

In reaching these determinations and approvals, the AOC Board considered, among other things, the following factors, potential benefits and risks of the Arrangement, and the elements of the Arrangement that provide protection to the AOC Shareholders:

the AOC Board concluded that the value offered to AOC Shareholders under the Arrangement is more favourable than the value that might have been realized through pursuing AOC’s current business plan given the AOC Board’s assessment of the current risks associated with economic and operating environment;
the Arrangement was the preferred transaction available to AOC and AOC Shareholders after conducting the extensive and thorough value maximizing strategic review process, taking into account the proposals received from, and discussions with, third parties with respect to various business transactions involving AOC;
the combination of AOC and Surge will result in a larger more competitive organization with improved liquidity in the market, greater exploration and development capacity and a larger market capitalization;
following completion of the Arrangement, Surge will have greater financial resources than AOC or Surge prior to the Arrangement, enabling it to undertake the exploration and development of oil and natural gas opportunities, and will be better able to exploit business opportunities that are presently available to Surge;
AOC Shareholders will exchange their shares in a non-listed company for shares in a company listed on the TSX and thereby gain access to greater investment liquidity;
AOC Shareholders will gain access to liquidity while at the same time continue to participate in the oil and gas prospects of AOC while gaining exposure to a larger base of existing production and the prospect inventory of Surge;
the asset base of Surge, combined with the asset base of AOC, represents a more diversified and stable investment than the asset base of AOC alone;
NBF provided an opinion that, as of the date of such opinion and subject to the various assumptions, qualifications and limitations and other matters stated in the AOC Fairness Opinion, the Consideration to be received by AOC Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the AOC Shareholders;
the Arrangement must be approved by not less than 66[2] ⁄3% of the votes cast by the AOC Shareholders present in person or represented by proxy at the AOC Meeting;
the Arrangement will only become effective if, after hearing from all interested Persons who choose to appear before it, the Court determines that the Arrangement is fair to the AOC Shareholders;
the AOC Shareholders will be granted the AOC Dissent Rights with respect to the Arrangement; and
under the Arrangement Agreement, the AOC Board retains the ability to consider and respond to Superior Proposals on the specific terms and conditions set forth in the Arrangement Agreement.

While management and the AOC Board expect that AOC will receive the benefits noted above, the Arrangement does expose AOC to additional risks, including the risk that AOC may fail to complete the Arrangement in accordance with the terms of the Arrangement Agreement, or at all, or AOC Shareholders will fail to realize the anticipated benefits of the Arrangement. See “ Risk Factors ”.

Surge Board

In reaching these determinations and approvals, the Surge Board considered, among other things, the following factors and potential benefits and risks of the Arrangement:

the acquisition of AOC provides Surge with an additional 4,100 Boe/d of 90% light oil and NGLs production, approximately 100 net sections of undeveloped land, a new core focus area in southeast Saskatchewan and a materially strengthened balance sheet;
the acquisition of AOC provides product diversification by providing Surge with additional exposure to light oil which receives higher realized prices per barrel;
the acquisition of AOC improves Surge’s netback per Boe with a forecast for increased realized revenue combined with decreased operating costs, decreased general and administrative costs and decreased financing costs;
the acquisition of AOC will result in a larger more competitive organization and enhance Surge’s liquidity in the market, exploration and development capacity, market capitalization and overall capital markets profile;
the Arrangement will require the Surge Issuance Resolution to be approved by a simple majority of the votes cast by the Surge Shareholders, present in person or by proxy at the Surge Meeting; and
upon completion of the Arrangement, Surge anticipates having improved financial liquidity on improved terms and conditions with approximately $235 million drawn on an anticipated $255 million Surge Credit Facilities.

While management and the Surge Board expect that Surge will receive the benefits noted above, the Arrangement does expose Surge to additional risks, including the risk that Surge may fail to complete the Arrangement in accordance with the terms of the Arrangement Agreement, or at all, or fail to realize the anticipated benefits of the Arrangement. See “ Risk Factors ”.

AOC Supporting Shareholders

Recommendations of the AOC Board

After considering certain matters, including the factors as set out under “ The Arrangement – Background to and Reasons for the Arrangement – Reasons for the Arrangement – AOC Board ”, the AOC Board unanimously: (i) determined that the Arrangement is in the best interests of AOC and the AOC Shareholders; (ii) determined that the Arrangement is fair to the AOC Shareholders; (iii) approved the Arrangement and the entering into of the Arrangement Agreement and completion of all transactions contemplated thereby; and (iv) recommends that AOC Shareholders vote in favour of the AOC Arrangement Resolution.

Recommendations of the Surge Board

After considering certain matters, including the factors as set out under “ The Arrangement – Background to and Reasons for the Arrangement – Reasons for the Arrangement – Surge Board ”, the Surge Board unanimously: (i) determined that the Arrangement is in the best interests of Surge; (ii) approved the Arrangement and the entering into of the Arrangement Agreement and completion of all transactions contemplated thereby; and (iii) recommends that Surge Shareholders vote in favour of the Surge Issuance Resolution.

Notwithstanding the recommendation of the Surge Board that Surge Shareholders vote in favour of the Surge Issuance Resolution and the Surge Share Consolidation Resolution, as applicable, Surge Shareholders should make their own decision whether to vote their Surge Shares in favour of the Surge Issuance Resolution and Surge Share Consolidation Resolution and, if appropriate, should consult their own legal, financial and other professional advisors in making those decisions.

Effect and Details of the Arrangement

General

the AOC Shareholder Agreement shall be terminated and of no further force or effect;
all outstanding securities convertible, exchangeable or exercisable for AOC Shares, including without limitation all AOC Options and all AOC Warrants shall be cancelled and cease to represent a right or claim of any kind or nature and the AOC Option Plan and any certificates representing AOC Warrants, as the case may be, shall be terminated and of no further force or effect;
each AOC Share held by a Dissenting AOC Shareholder shall be deemed to be transferred to Surge (free and clear of any Encumbrances) and each Dissenting AOC Shareholder shall cease to have any rights as an AOC Shareholder, other than the right to be paid the fair value of such Dissenting AOC Shareholder’s AOC Shares so transferred to Surge (and: (i) the name of each Dissenting AOC Shareholder shall be deemed to have been removed from the register of holders of AOC Shares as it relates to each AOC Share so transferred; and (ii) Surge shall be deemed to have been added to the register of AOC Shareholders as it relates to each AOC Share so transferred to Surge by each Dissenting AOC Shareholder);
each AOC Share held by an Exchanging Shareholder shall be, and shall be deemed to be, transferred to Surge (free and clear of any Encumbrances) and such Exchanging Shareholder shall cease to have any rights as an AOC Shareholder and, in exchange therefor, such Exchanging Shareholder shall receive (and for greater certainty, Surge shall issue) the Consideration in respect of each AOC Share so transferred to Surge (and: (i) the name of such Exchanging Shareholder shall be deemed to have been: (A) removed from the register of holders of AOC Shares as it relates to each AOC Share so transferred; and (B) added to the register of holders of Surge Shares as it relates to the Consideration so received by such Exchanging Shareholder; and (ii) Surge shall be deemed to have been added to the register of holders of AOC Shares as it relates to each AOC Share so transferred to Surge by an Exchanging Shareholder);
Acquisitionco and AOC shall be amalgamated to form Amalco1 and continue as one corporation under the ABCA in accordance with conditions in the Arrangement Agreement, including but not limited to:
(i) each AOC Share held by a Non-Resident AOC Shareholder (other than, for greater certainty, any AOC Shares transferred to Surge by an Non-Resident AOC Shareholder who is a Dissenting AOC Shareholder pursuant to Section 3.1(c)) of the Arrangement Agreement shall be, and shall be deemed to be, cancelled and such Non-Resident AOC Shareholder shall cease to have any rights as an AOC Shareholder and, in consideration therefor, such Non-Resident AOC Shareholder shall receive (and for greater certainty, Surge shall issue) the Consideration in respect of each AOC Share so cancelled (and the name of such Non-Resident AOC Shareholder shall be deemed to have been: (i) removed from the register of holders of AOC Shares as it relates to the AOC Shares so cancelled; and (ii) added to the register of holders of Surge Shares as it relates to the Consideration so received by such Non-Resident AOC Shareholder);
(ii) each AOC Share held by Surge shall be, and shall be deemed to be, cancelled and, in exchange therefor, Surge shall receive one (1) common share of Amalco1 in respect of each AOC Share so cancelled (and Surge shall be deemed to have been added to the register of holders of common shares of Amalco1 as it relates to the common shares of Amalco1 so received by Surge); and

(iii) each common share of Acquisitionco shall be, and shall be deemed to be, cancelled and, in exchange therefor, Surge shall receive one common share of Amalco1 in respect of each common share of Acquisitionco so cancelled (and Surge shall be deemed to have been added to the register of holders of common shares of Amalco1 as it relates to the common shares of Amalco1 so received by Surge); and
Surge and Amalco1 shall amalgamate to form Amalco pursuant to the provisions of section 184(1) of the ABCA and continue as one corporation under the name “Surge Energy Inc.” in accordance with the terms of the Arrangement Agreement.

Effect on AOC Incentives

As at the date hereof: (i) AOC Options to purchase an aggregate of 6,799,000 AOC Shares are outstanding, of which 6,799,000 AOC Options are expected to be “in-the-money” based on a deemed transaction value of $2.00 per AOC Share; and (ii) AOC Warrants to purchase an aggregate of 10,999,998 AOC Shares are outstanding, of which 4,399,986 AOC Warrants are expected to be “in-the-money” based on a deemed transaction value of $2.00 per AOC Share. Pursuant to the Arrangement Agreement, AOC has obtained executed AOC Exercise and Cancellation Agreements from each holder of AOC Options and AOC Warrants, pursuant to which each holder of AOC Options and AOC Warrants has agreed to conditionally exercise each AOC Option and/or AOC Warrant, as applicable, held immediately prior to the Effective Time on a “cashless exercise” basis in exchange for a number of AOC Shares equal to the quotient obtained when the Excess Amount is divided by $2.00. The number of AOC Shares issuable on the “cashless exercise” of AOC Options and AOC Warrants shall be rounded up to the next whole number of AOC Shares if the fractional entitlement is equal to or greater than 0.5 and shall, without any additional compensation, be rounded down to the next whole number of AOC Shares if the fractional entitlement is less than 0.5.

Procedural Steps

The Arrangement is proposed to be carried out pursuant to Section 193 of the ABCA. The following procedural steps must be taken in order for the Arrangement to become effective:

the AOC Arrangement Resolution must be approved by the AOC Shareholders in the manner set forth in the Interim Order;
the Surge Issuance Resolution must be approved by the Surge Shareholders;
the Court must grant the Final Order approving the Arrangement in form and substance satisfactory to AOC and Surge, acting reasonably, and such order shall not be set aside or modified in a manner unacceptable to AOC and Surge acting reasonably;
all other conditions precedent to the Arrangement, as set forth in the Arrangement Agreement, must be satisfied or waived by the appropriate Party, including the closing of the revisions to the Surge Credit Facilities;
all required regulatory approvals, including Competition Act Approval and the approval of the TSX, in respect of the completion of the Arrangement must be obtained; and
the Final Order and Articles of Arrangement in the form prescribed by the ABCA must be filed with the Registrar.

Payment of Consideration

Prior to the Effective Time, Surge shall issue and deliver to the Depositary an irrevocable treasury order authorizing the Depositary, as the registrar and transfer agent for the Surge Shares, to issue in a book based register the aggregate number of Surge Shares payable as consideration to the former holders of AOC Shares pursuant to the provisions of the Plan of Arrangement.

Upon the surrender to the Depositary of a certificate which immediately prior to the Effective Time represented outstanding AOC Shares, together with a duly completed and executed AOC Letter of Transmittal and such additional documents and instruments as the Depositary may reasonably require, the Depositary shall deliver to the applicable AOC Shareholder, as soon as practicable, the DRS Statement(s) representing, or other evidence of, Surge Shares that such AOC Shareholder is entitled to receive as consideration under the Arrangement, and after giving effect to the Surge Share Consolidation, if approved, in each case less any amounts withheld pursuant to Section 5.7 of the Plan of Arrangement.

The Depositary will receive reasonable and customary compensation for its services in connection with the Arrangement, will be reimbursed for certain out-of-pocket expenses and will be indemnified by Surge and AOC against certain liabilities in certain circumstances.

Court Approval

Interim Order

On July 15, 2021, AOC obtained the Interim Order providing for the calling and holding of the AOC Meeting and other procedural matters. A copy of the Interim Order is attached as Appendix E to this Information Circular.

Final Order

Subject to the terms of the Arrangement Agreement, if the AOC Arrangement Resolution is approved at the AOC Meeting and the Surge Issuance Resolution is approved at the Surge Meeting, AOC will make an application to the Court for the Final Order at the Calgary Courts Centre, 601 – 5 Street S.W., Calgary, Alberta, Canada, or via video conference, on August 17, 2021 at 2:00 p.m. (Calgary time) or as soon thereafter as counsel may be heard. The Notice of Application accompanies this Information Circular as Appendix C. Any AOC Shareholder or any other interested party desiring to appear at the hearing, is required to file with the Court and serve upon AOC, on or before 4:00 p.m. (Calgary time) on August 13, 2021 (or the Business Day that is two Business Days prior to the date of the AOC Meeting if the AOC Meeting is not held on, August 17, 2021), a notice of its intention to appear, including an address for service in Calgary, Alberta, together with any evidence or materials which are to be presented to the Court. Service on AOC is to be effected by delivery to AOC’s counsel, Burnet, Duckworth & Palmer LLP, Suite 2400, 525 – 8th Avenue S.W., Calgary, Alberta T2P 1G1, Attention: Ryan Algar. AOC Shareholders should consult their legal advisors with respect to the legal rights available to them in relation to the Arrangement .

AOC has been advised by its legal counsel that the Court has broad discretion under the ABCA when making orders with respect to the Arrangement and that the Court, in hearing the application for the Final Order, will consider, among other things, the fairness of the Arrangement to the AOC Shareholders and any other interested party as the Court determines appropriate. The Court may approve the Arrangement either as proposed or as amended in any manner the Court may direct, subject to compliance with such terms and conditions, if any, as the Court may determine appropriate. Either of Surge or AOC may determine not to proceed with the Arrangement in the event that any amendment ordered by the Court is not satisfactory to it, acting reasonably.

Surge Shares issuable to AOC Shareholders in exchange for their AOC Shares (and any post-amalgamation Surge Shares deemed, for purposes of the U.S. Securities Act, to be issuable to holders of pre-amalgamation Surge Shares under the Arrangement) under the Arrangement have not been and will not be registered under the U.S. Securities Act, and such securities will be issued in reliance upon the exemption from the registration requirements of the U.S. Securities Act provided by Section 3(a)(10) thereof. The Final Order is required for the Arrangement to become effective and the Court will be advised prior to the hearing on the Final Order that if the terms and conditions of the Arrangement are approved by the Court pursuant to the Final Order, the issuance of Surge Shares issuable to the AOC Shareholders (and the deemed issuance under the U.S. Securities Act of post-amalgamation Surge Shares issuable to holders of pre-amalgamation Surge Shares) pursuant to the Arrangement will not require registration under the U.S. Securities Act, pursuant to Section 3(a)(10) thereof.

Timing

Subject to all conditions precedent to the Arrangement as set forth in the Arrangement Agreement being satisfied or waived by the appropriate Party, the Arrangement will become effective upon the Effective Date. If the AOC Arrangement Resolution is approved at the AOC Meeting and the Surge Issuance Resolution is approved at the Surge Meeting, as required by the Interim Order, AOC will apply to the Court for the Final Order approving the Arrangement. If the Final Order is obtained on or about August 17, 2021, in form and substance satisfactory to the Parties and all other conditions specified in the Arrangement Agreement are satisfied or waived, the Parties expect the Effective Date will be on or about August 18, 2021. The Effective Date could be delayed, however, for a number of reasons, including an objection before the Court in the hearing of the application for the Final Order. It is a condition to the completion of the Arrangement that the Arrangement shall have become effective on or prior to October 31, 2021 unless otherwise agreed to by Surge and AOC.

For full particulars in respect of all of the events which will occur pursuant to the Plan of Arrangement, see the full text of the Plan of Arrangement which is attached as Exhibit “A” to Appendix D to this Information Circular.

The Arrangement Agreement

The Arrangement Agreement provides for the implementation of the Plan of Arrangement. The Arrangement Agreement contains covenants, representations and warranties of and from each of AOC and Surge and various conditions precedent, both mutual and with respect to each Party. The following is a summary of certain material provisions of the Arrangement Agreement and is not comprehensive but is qualified in its entirety by reference to the full text of the Arrangement Agreement and the Plan of Arrangement set forth in Appendix D and Exhibit “A” to Appendix D, respectively, to this Information Circular. AOC Shareholders and Surge Shareholders are encouraged to read the Arrangement Agreement and the Plan of Arrangement in their entirety.

The Arrangement Agreement provides that Surge will acquire all of the outstanding AOC Shares by way of a plan of arrangement under Section 193 of the ABCA pursuant to which, on the Effective Date, on the terms and subject to the conditions contained in the Plan of

Arrangement, AOC Shareholders (other than Dissenting AOC Shareholders) will receive 3.1746 Surge Shares for each AOC Share held in accordance with the terms of the Plan of Arrangement (prior to and without assuming the completion of the Surge Share Consolidation). In the event the Surge Share Consolidation is completed, AOC Shareholders (other than Dissenting AOC Shareholders) will receive approximately 0.3735 Surge Shares for each AOC Share (representing approximately 0.1176 Surge Shares for each Surge Share to be issued under the Arrangement). See “ Matters to be Acted Upon at the Surge Meeting – Surge Share Consolidation ”.

Mutual Covenants Regarding the Arrangement

AOC and Surge have each given, in favour of the Other Party, usual and customary mutual covenants for an agreement of this nature including mutual covenants to conduct their respective businesses in the usual and ordinary course and consistent with past practices, to use their respective reasonable commercial efforts to satisfy, or cause the satisfaction of, the conditions precedent to their respective obligations under the Arrangement Agreement, to not take, or cause to be taken, any action or cause anything to be done that would cause such obligations not to be fulfilled in a timely manner and to take, or cause to be taken, all other actions and to do, or cause to be done, all other things necessary, proper or advisable under Applicable Laws to complete the Arrangement.

Covenants Regarding Non Solicitation

AOC has agreed that:

it shall immediately cease and cause to be terminated all existing discussions and negotiations (including, without limitation, through any officers, directors, employees, representatives, agents or advisors of AOC or other parties on its behalf) (“ Representatives ”), with any parties (other than pursuant to the Arrangement Agreement) with respect to any proposal that constitutes, or may reasonably be expected to constitute or lead to an Acquisition Proposal. AOC shall not amend, modify, waive, release or otherwise forebear in the enforcement of, and shall use all commercially reasonable efforts to enforce, any confidentiality, non-solicitation or standstill or similar agreements or provisions to which it and any third parties are parties. AOC shall discontinue access to any of its confidential information (and not establish or allow access to any of its confidential information, or any data room, virtual or otherwise) and shall as soon as possible request, to the extent that it is entitled to do so, and exercise all rights it has to require, the return or destruction of all confidential information provided to any third parties who have entered into a confidentiality or similar agreement with AOC relating to an Acquisition Proposal and shall request in accordance with the terms of such confidentiality or similar agreement the destruction of all material including or incorporating or otherwise reflecting any material confidential information regarding it. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in Section 3.4(a) of the Arrangement Agreement by AOC or its officers, directors, employees, advisors, Representatives and agents shall be deemed to be a breach of Section 3.4(a) of the Arrangement Agreement by AOC.
AOC shall not, directly or indirectly, do or authorize or permit any of its officers, directors or employees or any financial advisor, expert or other Representative retained by it to do, any of the following:
solicit, assist, initiate, encourage or in any way knowingly facilitate (including by way of furnishing information, or entering into any form of written or oral agreement, arrangement or understanding), the making of any proposal or offer that constitutes or may constitute, or may reasonably be expected to lead to, an Acquisition Proposal or inquiries, proposals or offers regarding an Acquisition Proposal;
enter into or participate in any discussions or negotiations regarding an Acquisition Proposal, or furnish or provide access to any other Person any information, including with respect to its businesses, the AOC Assets, liabilities, operations, prospects or condition (financial or otherwise), in connection with an Acquisition Proposal or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt of any other Person to do or seek to do any of the foregoing;
waive, or otherwise forbear in the enforcement of, or enter into or participate in any discussions, negotiations or agreements to waive or otherwise forbear in respect of, any rights or other benefits under confidential information agreements relating to an Acquisition Proposal, including, without limitation, any “standstill” or similar provisions thereunder (it being acknowledged and agreed that the automatic termination of any standstill provision of any such agreement as a result of entering into and the announcement of the Arrangement Agreement by the Parties pursuant to the express terms of any such agreement, shall not be in violation of Section 3.4(b) of the Arrangement Agreement);
accept, recommend, approve, agree to or endorse, or propose publicly to accept, recommend, approve, agree to or endorse, any Acquisition Proposal or agreement, understanding or arrangement in relation thereto; or
withdraw or modify, or propose to withdraw or modify, in any manner adverse to Surge, the approvals, determinations and recommendations of the AOC Board as set forth in Section 2.9 of the Arrangement Agreement,
provided, however, that notwithstanding any other provision thereof, AOC and its respective officers, directors, advisors and other Representatives may, prior to obtaining the approval of the AOC Shareholders of the AOC Arrangement Resolution at the AOC Meeting:
enter into or participate in any discussions or negotiations with a third party who (without any solicitation, initiation or encouragement, directly or indirectly, after June 22, 2021, by it or any of its officers, directors, Representatives, agents or advisors of AOC or other Representative retained by it) seeks to initiate such discussions or negotiations with AOC, provided that

such discussions or negotiations did not result from or are not connected to a breach of Section 3.4 of the Arrangement Agreement, and subject to execution of a confidentiality and standstill agreement containing customary standstill provisions (provided that such confidentiality agreement shall provide for disclosure thereof (along with all information provided thereunder) to Surge as set forth below), AOC may furnish to such third party information concerning it and its business and the AOC Assets, in each case if, and only to the extent that:

  - the third party has first made, after June 22, 2021, an unsolicited written bona fide Acquisition Proposal in respect of which the AOC Board determines in good faith, after consultation with its external legal and independent financial advisors, constitutes, or would reasonably be expected to constitute or lead to, a Superior Proposal; and

  - prior to furnishing such information to or entering into or participating in any such discussions or negotiations with such third party, it provides prompt notice to Surge to the effect that it is furnishing information to or entering into or participating in discussions or negotiations with such Person together with a copy of the confidentiality and standstill agreement referenced above and, if not previously provided to Surge, copies of all information provided to such third party concurrently with the provision of such information to such third party, and provided further that it shall notify Surge orally and in writing of any inquiries, offers or proposals relating to or constituting an Acquisition Proposal (or any amendment thereto), which written notice shall include, without limitation, a copy of any such proposal, the identity of the Person making it, if not previously provided to Surge, copies of all information provided to such party, any material correspondence with respect thereto, and all other information reasonably requested by Surge, within 24 hours of the receipt thereof, and shall keep Surge promptly and fully informed of the status and details of any such inquiry, offer or proposal and answer the respective questions of Surge with respect thereto on a timely basis; and

accept, recommend, approve or enter into an agreement to implement a Superior Proposal from a third party, but only if prior to such acceptance, recommendation, approval or implementation:
- the AOC Board shall have concluded in good faith, after considering all proposals to adjust the terms and conditions of the Arrangement Agreement as contemplated by Section 3.4(d) of the Arrangement Agreement and after receiving the advice of outside counsel as reflected in minutes of the AOC Board that the taking of such action is necessary for such board of directors in the discharge of its fiduciary duties under Applicable Laws; and
- AOC shall otherwise have complied with its obligations set forth in Section 3.4 of the Arrangement Agreement, including without limitation Section 3.4(d), and terminates the Arrangement Agreement in accordance with Section 8.1(a)(v) of the Arrangement Agreement and concurrently therewith pays the Surge Termination Fee to Surge.
AOC shall promptly (and in any event within 24 hours of the receipt thereof) notify Surge (at first orally and then in writing) of any Acquisition Proposal (or any amendment thereto) or any request for non-public information relating to it or its business or the AOC Assets. Such notice shall include a copy of any written Acquisition Proposal (and any amendment thereto) which has been received or, if no written Acquisition Proposal has been received, a description of the material terms and conditions of, and the identity of the Person making any inquiry, proposal, offer or request. AOC shall also provide such further and other details of the Acquisition Proposal or any amendment thereto as Surge may reasonably request. AOC shall keep Surge promptly and fully informed of the status, including any change to material terms, of any Acquisition Proposal or any amendment thereto, shall respond promptly to all inquiries by Surge, with respect thereto, and shall provide Surge copies of all material correspondence and other written material sent to or provided to it by any Person in connection with such inquiry, proposal, offer or request or sent or provided by it to any Person in connection with such inquiry, proposal, offer or request.
AOC shall give Surge, orally and in writing, at least three (3) Business Days advance notice of any meeting to be held by the AOC Board to accept, recommend, approve or enter into an agreement to implement a Superior Proposal, which notice shall:
identify the third party making the Superior Proposal;
provide a true and complete copy of the Superior Proposal, including any financing documents, and any amendments thereto;
set forth the AOC Board’s reasonable determination of the financial value of the consideration offered by such third party to AOC Shareholders under such Superior Proposal; and
confirm that the AOC Board has determined that such Acquisition Proposal constitutes a Superior Proposal.
During the three (3) Business Day period commencing on the delivery of such notice, AOC has agreed not to accept, recommend, approve or enter into any agreement to implement such Superior Proposal and not to release the party making the Superior Proposal from any standstill provisions and shall not withdraw, redefine, modify or change its recommendation in respect of the Arrangement. In addition, during such three (3) Business Day period it shall, and shall cause its financial and legal advisors to, negotiate in good faith with Surge and its financial and legal advisors to make such adjustments to the terms and conditions of the Arrangement Agreement and the Arrangement as would enable it to proceed with the Arrangement as amended rather than the Superior Proposal. In the event Surge submits a binding offer to amend the Arrangement Agreement and the Arrangement such that the Superior Proposal ceases to be a Superior Proposal and so advises the AOC Board prior to the expiry of such three (3) Business Day period, the AOC Board shall not accept, recommend, approve or enter into any agreement to implement such Superior Proposal, shall not release the party making the Superior Proposal from any standstill provisions and shall not withdraw, redefine, modify or change its recommendation in respect of the Arrangement. Each successive amendment to any Superior Proposal that results in an increase in, or modification of, the consideration (or value of such consideration) to be received by the AOC Shareholders pursuant thereto shall constitute a new Superior Proposal for the purposes of the Arrangement Agreement and a new three (3) Business Day period shall commence.

AOC shall reaffirm, in a manner acceptable to Surge, acting reasonably, its recommendation of the Arrangement promptly and in any event within five (5) Business Days of any written request to do so by Surge (or, in the event that the AOC Meeting to approve the Arrangement is scheduled to occur within such three (3) Business Days, prior to the scheduled date of such meeting) in the event that: (i) any Acquisition Proposal which is publicly announced is determined not to be a Superior Proposal; or (ii) the Parties have entered into an amended agreement pursuant to Section 3.4(e) of the Arrangement Agreement which results in any Acquisition Proposal not being a Superior Proposal.
Each of AOC and Surge agree that all information that may be provided to Surge by AOC with respect to any Acquisition Proposal pursuant to Section 3.4 of the Arrangement Agreement shall be treated as if it were “Confidential Information” as that term is defined in the Confidentiality Agreements and shall not be disclosed or used except in accordance with the provisions of the Confidentiality Agreements or in order to enforce its rights under the Arrangement Agreement in legal proceedings.
AOC shall ensure that its officers, directors, employees, Representatives, agents or advisors retained by it are aware of the provisions of Section 3.4 of the Arrangement Agreement and shall be responsible for any breach of Section 3.4 of the Arrangement Agreement by any of them.
Nothing in the Arrangement Agreement shall prevent the AOC Board from complying with Section 2.17 of National Instrument 62-104 – Take Over Bids and Issuer Bids of the Canadian Securities Administrators and similar provisions under Applicable Securities Laws relating to the provision of directors’ circulars in respect of an Acquisition Proposal that is not a Superior Proposal but only following compliance with Section 3.4(c) of the Arrangement Agreement by AOC.

Each of AOC and Surge agree that all information that may be provided to Surge by AOC with respect to any Acquisition Proposal pursuant to Section 3.4 of the Arrangement Agreement shall be treated as if it were “Confidential Information” as that term is defined in the Confidentiality Agreements and shall not be disclosed or used except in accordance with the provisions of the Confidentiality Agreements or in order to enforce its rights under the Arrangement Agreement in legal proceedings.

Representations and Warranties

Each of AOC and Surge made certain customary representations and warranties related to, among other things, the following: organization and qualification; authority relative to the Arrangement Agreement; subsidiaries; no violations; litigation; taxes; Investment Canada Act (Canada); ITA residency; reporting issuer status; capitalization; equity monetization plans; no orders; public records and reports; financial statements; books and records; absence of certain changes or events; reserves report registration, exemption orders and licenses; compliance with laws; restrictions on business; non-arm’s length transactions; title; production allowables; production penalties; leases and title documents; quiet enjoyment; take or pay obligations; real property; operation and condition of wells and tangibles; no expropriation; government incentives; insurance; Government Authorizations; processing and transportation commitments; areas of mutual interest; purchase rights; drilling commitments; production limits; wells, facilities and lands; reserves reports; absence of undisclosed liabilities; absence of undisclosed changes; no defaults; pre-emptive rights; environmental matters; material contracts; employee benefit plans; employees; employment agreements; brokers and finders; rights plans; fairness opinions; board approval; proceeds of crime; swaps; arrangements in respect of outstanding securities; insiders; operational matters; guarantees; payments to employees and non-residents; net debt; transaction costs; Tax Pools; authorizations for expenditures; liability management ratios; production; location of assets and U.S. sales; status as a “foreign private issuer” within the meaning of Rule 405 of Regulation C under the U.S. Securities Act; status as an “investment company” pursuant to the Investment Company Act of 1940 (United States), as amended; United States Securities Exchange Act of 1934 , as amended; standstill provisions; no withheld information; and disclosure letters.

Conditions Precedent

Mutual Conditions Precedent

The Arrangement Agreement provides that the respective obligations of the Parties to consummate the transactions contemplated in the Arrangement Agreement, and in particular the Arrangement, are subject to the satisfaction, on or before the Effective Date or such other time specified, of the following conditions:

the Interim Order shall have been granted in form and substance satisfactory to each of AOC and Surge, acting reasonably, and such order shall not have been set aside or modified in a manner unacceptable to AOC and Surge, each acting reasonably, on appeal or otherwise;
Surge shall have incorporated Acquisitionco as a wholly-owned subsidiary of Surge in a manner consistent with the Plan of Arrangement;
the AOC Arrangement Resolution shall have been passed by the AOC Shareholders;
the Surge Issuance Resolution shall have been passed by the Surge Shareholders;
the Final Order shall have been granted in form and substance satisfactory to AOC and Surge, acting reasonably, and such order shall not have been set aside or modified in a manner unacceptable to AOC and Surge, each acting reasonably, on appeal or otherwise;
the Effective Date shall occur on or before the Outside Date;

the TSX shall have conditionally approved for listing all of the Surge Shares issuable to the AOC Shareholders pursuant to the Arrangement;
the Articles of Arrangement to be filed with the Registrar in accordance with the Arrangement shall be in form and substance satisfactory to each of Surge and AOC, acting reasonably;
the amendment and extension to the Surge Credit Facilities shall occur concurrently with the closing of the Arrangement pursuant to the agreement entered into between Surge and its lending syndicate. Pursuant to the agreement, Surge’s fully conforming first lien revolving credit facilities will be set at $215 million and the maturity date will be extended from July 1, 2022 to November 30, 2022, with the next bank review scheduled to be on or before November 30, 2021.
each of AOC and Surge shall have obtained all consents, waivers, permissions and approvals necessary to complete the Arrangement by or from relevant Governmental Authorities, on terms and conditions satisfactory to the Parties, acting reasonably, including without limitation the Competition Act Approval; and
there shall be no action taken under any existing Applicable Law, nor any statute, rule, regulation or order which is enacted, enforced, promulgated or issued by any Governmental Authority, that:
makes illegal or otherwise directly or indirectly restrains, enjoins or prohibits the Arrangement or any other transactions contemplated by the Arrangement Agreement; or
results in a judgment or assessment of material damages directly or indirectly relating to the transactions contemplated in the Arrangement Agreement.

The foregoing conditions are for the mutual benefit of AOC and Surge and, with the exception of obtaining: (i) approval of the TSX under Section 5.1(g) of the Arrangement Agreement; (ii) the Competition Act Approval; (iii) the Interim Order and Final Order; (iv) the approval of the AOC Shareholders of the AOC Arrangement Resolution; and (v) the approval of the Surge Shareholders of the Surge Issuance Resolution, may be waived, in whole or in part, by the Parties at any time. If any of the foregoing conditions are not satisfied or waived on or before the Outside Date, then a Party may terminate the Arrangement Agreement as provided in Section 8.1(a)(ii) thereof (save and except for Section 4.3, Article 6, Article 9, Section 10.4 and Section 10.8 of the Arrangement Agreement which shall survive such termination and remain in full force and effect) by written notice to the Other Party in circumstances where the failure to satisfy any such condition is not the result, directly or indirectly, of such terminating Party’s breach of any term or condition of the Arrangement Agreement.

Additional Conditions to Obligations of AOC

The Arrangement Agreement provides that the obligation of AOC to consummate the transactions contemplated in the Arrangement Agreement, and in particular the Arrangement, is subject to the following conditions:

the representations and warranties of Surge set forth in the Arrangement Agreement will be true and correct as of the Effective Date as if made on and as of such date (except to the extent such representations and warranties speak as of an earlier date, the accuracy of which will be determined as of that specified date), except where any inaccuracies of representations or warranties would not, either individually or in the aggregate, have a Material Adverse Effect on Surge (it being understood that, for purposes of determining accuracy of such representations and warranties, all “Material Adverse Effect”, “Material Adverse Change” and other materiality qualifications contained in such representations and warranties will be disregarded) and Surge will have provided to AOC a certificate of a senior officer certifying (without personal liability) such accuracy on the Effective Date, provided that Surge will be entitled to cure any breach of a representation and warranty within five (5) Business Days after receipt of written notice thereof from AOC (except that no cure period will be provided for a breach which by its nature cannot be cured and, in no event, will any cure period extend beyond the Outside Date);
Surge will have complied in all material respects with its covenants contained in the Arrangement Agreement, except where the failure to comply in all respects with such covenants, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Surge and the Surge Subsidiary, taken as a whole, or would not reasonably be expected to significantly impede the ability of the Parties to complete the Arrangement, and Surge will have provided to AOC a certificate of a senior officer certifying (without personal liability) compliance with such covenants; provided that Surge will be entitled to cure any breach of a covenant within five (5) Business Days after receipt of written notice thereof from AOC (except that no cure period will be provided for a breach which by its nature cannot be cured and, in no event, will any cure period extend beyond the Outside Date);
No act, action, suit, proceeding, objection or opposition shall have been threatened or taken before or by any Governmental Authority or by any elected or appointed public official or private Person in Canada or elsewhere, whether or not having the force of law, and no law, regulation, policy, judgment, decision, order, ruling or directive (whether or not having the force of law) shall have been proposed, enacted, promulgated, amended or applied, which in the sole judgment of AOC, acting reasonably, in either case has had or, if the Arrangement was consummated, would result in a Material Adverse Change or have a Material Adverse Effect on Surge and the Surge Subsidiary, taken as a whole, or would, or would reasonably be expected to, materially impede the ability of the Parties to complete the Arrangement;
Surge shall have furnished AOC with: (i) certified copies of the resolutions duly passed by the Surge Board approving the entering into of the Arrangement Agreement and the consummation of the transactions contemplated in the Arrangement Agreement; and (ii) a certified copy of the Surge Issuance Resolution duly passed by Surge Shareholders at the Surge Meeting;

Between June 22, 2021 and the Effective Time, there shall not have occurred any Material Adverse Change with respect to Surge;
Surge shall have deposited the Consideration with the Depositary; and
Surge shall have tabled duly executed copies of all agreements, documents and instruments required to be tabled by Surge pursuant to the Plan of Arrangement.

The foregoing conditions are for the exclusive benefit of AOC and may be waived by AOC in its sole discretion, in whole or in part, at any time and from time to time without prejudice to any other rights which AOC may have. If any of the foregoing conditions are not satisfied or waived on or before the Outside Date, AOC may, in addition to any other remedies it may have at law or equity, terminate the Arrangement Agreement as provided in Section 8.1(a)(ii) thereof (and save and except for Section 4.3, Article 6, Article 9, Section 10.4 and Section 10.8 of the Arrangement Agreement which shall survive such termination and remain in full force and effect) in circumstances where the failure to satisfy any such condition is not the result, directly or indirectly, of AOC’s breach of any term or condition of the Arrangement Agreement.

Additional Conditions to Obligations of Surge

The Arrangement Agreement provides that the obligation of Surge to consummate the transactions contemplated in the Arrangement Agreement, and in particular the Arrangement, is subject to the following conditions:

the representations and warranties in Sections 4.1(k)(i) of the Arrangement Agreement as to the number of issued and outstanding AOC Shares, AOC Warrants and AOC Options shall be true and correct as of the date of the Arrangement Agreement and the Effective Date as if made on such date, without being subject to any qualifier as to materiality (except, it being understood that the number of AOC Shares outstanding in Subsection 4.1(k)(i) of the Arrangement Agreement may increase, and the number of AOC Options and AOC Warrants may each decrease, from the number outstanding on the date of the Arrangement Agreement solely as a result of the “cashless exercise” of AOC Options and AOC Warrants in accordance with Section 2.5 of the Arrangement Agreement, but only to the extent that such securities are specifically described in Subsection 4.1(k)(i) of the Arrangement Agreement), other than inaccuracies that are in the aggregate de minimis or result from rounding as a result of fractional entitlements upon such exercise of AOC Options and AOC Warrants;
the remaining representations and warranties of AOC will be true and correct as of the Effective Date as if made on and as of such date (except to the extent such representations and warranties speak as of an earlier date, the accuracy of which will be determined as of that specified date), except where any inaccuracies of representations and warranties would not, either individually or in the aggregate, have a Material Adverse Effect on AOC (it being understood that, for purposes of determining accuracy of such representations and warranties, all “Material Adverse Effect”, “Material Adverse Change” and other materiality qualifications contained in such representations and warranties will be disregarded), and AOC will have provided to Surge a certificate of a senior officer certifying (without personal liability) such accuracy on the Effective Date, provided that AOC will be entitled to cure any breach of a representation and warranty within five Business Days after receipt of written notice thereof from Surge (except that no cure period will be provided for a breach which by its nature cannot be cured and, in no event, will any cure period extend beyond the Outside Date);
AOC will have complied in all material respects with its covenants contained in the Arrangement Agreement, except where the failure to comply in all respects with such covenants, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on AOC or would not reasonably be expected to significantly impede the ability of the Parties to complete the Arrangement, and AOC will have provided to Surge a certificate of a senior officer (without personal liability) certifying compliance with such covenants; provided that AOC will be entitled to cure any breach of a covenant within five (5) Business Days after receipt of written notice thereof from Surge (except that no cure period will be provided for a breach which by its nature cannot be cured and, in no event, will any cure period extend beyond the Outside Date);
no act, action, suit, proceeding, objection or opposition shall have been threatened or taken before or by any Governmental Authority or by any elected or appointed public official or private Person in Canada or elsewhere, whether or not having the force of law, and no law, regulation, policy, judgment, decision, order, ruling or directive (whether or not having the force of law) shall have been proposed, enacted, promulgated, amended or applied, which in the sole judgment of Surge, acting reasonably, in either case has had or, if the Arrangement was consummated, would result in a Material Adverse Effect on AOC, or would materially impede the ability of the Parties to complete the Arrangement;
AOC shall have furnished Surge with: (i) certified copies of the resolutions duly passed by the AOC Board approving the entering into of the Arrangement Agreement and the consummation of the transactions contemplated in the Arrangement Agreement; and (ii) a certified copy of the AOC Arrangement Resolution duly passed by AOC Shareholders at the AOC Meeting;
the aggregate number of AOC Shares held by AOC Shareholders who have validly exercised and not withdrawn Dissent Rights shall not exceed 5% of the AOC Shares then outstanding, and AOC shall have provided to Surge a certificate of a senior officer certifying (without personal liability) such facts on the Effective Date with respect to AOC;
between June 22, 2021 and the Effective Time, there shall not have occurred any Material Adverse Change with respect to AOC;
Surge shall be satisfied, acting reasonably, that (i) all AOC Options and AOC Warrants have either been settled as set forth in the Arrangement Agreement, as applicable, or terminated or Surge shall be otherwise satisfied, acting reasonably, that the AOC Options and AOC Warrants will no longer represent any right to acquire AOC Shares after giving effect to the Arrangement, and (ii) there are no other outstanding claims or rights or securities which could become claims or rights to AOC Shares, and AOC shall have provided to Surge a certificate of a senior officer certifying (without personal liability) such facts on the Effective Date;

executed mutual resignations and releases in a form acceptable to Surge, acting reasonably, shall have been received by AOC and Surge on or prior to the Effective Date from each director of AOC and each other Person who has received an AOC Termination Payment;
Surge shall be satisfied in its sole discretion that: (i) there shall not have occurred any material breach by any AOC Lock-Up Shareholder or AOC D&O Shareholder of any of the restrictions on transfers of AOC Shares contained in any AOC Support Agreement; and (ii) the AOC Closing Share Register is consistent with, and accurately reflects, any transfer of AOC Shares between an AOC Lock-Up Shareholder and another AOC Lock-Up Shareholder or an AOC D&O Shareholder which has been completed prior to the Effective Time; and
AOC shall have tabled duly executed copies of all agreements, documents and instruments required to be tabled by AOC pursuant to the Plan of Arrangement.

The foregoing conditions are for the exclusive benefit of Surge and may be waived by Surge in its sole discretion, in whole or in part, at any time and from time to time without prejudice to any other rights which Surge may have. If any of the foregoing conditions are not satisfied or waived, Surge may, in addition to any other remedies it may have at law or equity, terminate the Arrangement Agreement as provided in Section 8.1(a)(ii) therein (save and except for Section 4.3, Article 6, Article 9, Section 10.4 and Section 10.8 of the Arrangement Agreement which shall survive such termination and remain in full force and effect) in circumstances where the failure to satisfy any such condition is not the result, directly or indirectly, of Surge’s breach of the Arrangement Agreement.

Termination of the Arrangement Agreement

The Arrangement Agreement may be terminated at any time prior to the Effective Date:

by mutual written consent of AOC and Surge;
as provided in Sections 5.1, 5.2 and 5.3 of the Arrangement Agreement;
by AOC upon the occurrence of an AOC Damages Event as provided in Section 6.1 of the Arrangement Agreement;
by Surge upon the occurrence of a Surge Damages Event as provided in Section 6.2 of the Arrangement Agreement; and
by AOC upon the occurrence of a Surge Damages Event as provided in Section 6.2(d) of the Arrangement Agreement (in accordance with Section 3.4(b)(vii) of the Arrangement Agreement and provided AOC has complied with its obligations set forth in Section 3.4(d) of the Arrangement Agreement) and the payment by AOC to Surge of the Surge Termination Fee as required by Section 6.2 of the Arrangement Agreement has been made.

In the event of the termination of the Arrangement Agreement in the circumstances set out above, the Arrangement Agreement shall forthwith become void and neither Party shall have any liability or further obligation to and of the Other Party under the Arrangement Agreement except as provided in Section 4.3, Article 6, Article 9 and Sections 10.4 and 10.8 of the Arrangement Agreement and each Party’s obligations under the Confidentiality Agreements, which shall survive such termination, and provided that neither the termination of the Arrangement Agreement nor anything contained in Subsection 8.1(b) of the Arrangement Agreement shall relieve either Party from any liability for any breach by it of the Arrangement Agreement, including from any inaccuracy in any of its representations and warranties and any non-performance by it of its covenants made in the Arrangement Agreement, prior to the date of such termination.

Termination Fees

AOC Damages

If at any time after the execution of the Arrangement Agreement and prior to its termination:

the Surge Board: (i) fails to make any of the recommendations or determinations required to be made by Section 2.10 of the Arrangement Agreement; or (ii) withdraws modifies or changes any of the recommendations or determinations required to be made by Section 2.10 of the Arrangement Agreement;
Section 5.2(f) of the Arrangement Agreement is not satisfied on or before the Outside Date; or
a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Surge under the Arrangement Agreement occurs that would cause any condition in Section 5.2(a) or Section 5.2(b) thereof not to be satisfied, and such breach or failure is incapable of being cured or is not cured in accordance with the terms of such Section, as applicable; provided that any wilful breach shall be deemed to be incapable of being cured and provided that AOC is not then in breach of the Arrangement Agreement so as to cause any condition in Section 5.3(a) or 5.3(b) thereof not to be satisfied,

each of the above being an “ AOC Damages Event ”, then in the event of the termination of the Arrangement Agreement pursuant to Article 8 thereof, Surge shall pay to AOC (or to whom AOC may direct in writing) the AOC Termination Amount as liquidated damages in consideration for the disposition of AOC’s rights under the Arrangement Agreement in immediately available funds to an account designated by AOC within two (2) Business Days after the first to occur of such foregoing events. After an AOC Damages Event, but prior to payment of the AOC Termination Amount, Surge shall be deemed to hold such applicable payment in trust for AOC. For greater certainty, AOC is not entitled to more than one payment of the AOC Termination Amount pursuant to the Arrangement Agreement.

Surge Damages

If at any time after the execution of the Arrangement Agreement and prior to its termination:

the AOC Board: (i) fails to make any of the recommendations or determinations referred to in Section 2.9 of the Arrangement Agreement; or (ii) withdraws, amends, changes or qualifies, or proposes publicly to withdraw, amend, change or qualify, in any manner adverse to Surge, any of its recommendations, approvals or determinations referred to in Section 2.9 of the Arrangement Agreement;
the AOC Board shall have failed to publicly reaffirm any of its recommendations, approvals or determinations referred to in Section 2.9 of the Arrangement Agreement in accordance with Section 3.4(e) therein or within five (5) Business Days of any written request to do so by Surge (or, in the event that the AOC Meeting to approve the Arrangement is scheduled to occur within such five (5) Business Days, prior to the scheduled date of such meeting);
a bona fide Acquisition Proposal (or bona fide intention to make an Acquisition Proposal) is publicly announced, proposed, offered or made to AOC or the AOC Shareholders prior to the date of the AOC Meeting and:
remains outstanding at the time of the AOC Meeting;
the AOC Shareholders do not approve the AOC Arrangement Resolution or the AOC Arrangement Resolution is not submitted for their approval at the AOC Meeting; and
AOC accepts, recommends, approves or enters into an agreement to implement any Acquisition Proposal within 12 months of the date of the Arrangement Agreement,

provided, however, that for the purposes of Section 6.2(c) of the Arrangement Agreement, all references to “20%” in the definition of Acquisition Proposal shall be changed to “50%”;

the AOC Board or any committee of the AOC Board accepts, recommends or approves, or AOC enters into an agreement with respect to, a Superior Proposal;
AOC is in breach of any of its covenants or obligations in Section 3.4 of the Arrangement Agreement in any material respect; or
a breach of any representation or warranty or failure to perform any covenant or agreement on the part of AOC under the Arrangement Agreement occurs that would cause any condition in Section 5.3(a) or Section 5.3(b) therein not to be satisfied, and such breach or failure is incapable of being cured or is not cured in accordance with the terms of such Section, as applicable; provided that any wilful breach shall be deemed to be incapable of being cured and provided that Surge is not then in breach of the Arrangement Agreement so as to cause any condition in Section 5.2(a) or 5.2(b) therein not to be satisfied,

each of the above being a “ Surge Damages Event ”, then in the event of the termination of the Arrangement Agreement pursuant to Article 8 thereof, AOC shall pay to Surge (or to whom Surge may direct in writing) the Surge Termination Fee as liquidated damages in consideration for the disposition of Surge’s rights under the Arrangement Agreement in immediately available funds to an account designated by Surge within two Business Days after the first to occur of the events described above. After a Surge Damages Event, but prior to payment of the Surge Termination Fee, AOC shall be deemed to hold such applicable payment in trust for Surge. For greater certainty, Surge is not entitled to more than one payment of the Surge Termination Fee pursuant to Section 6.2 of the Arrangement Agreement.

Liquidated Damages

Each Party acknowledges that the AOC Termination Amount and the Surge Termination Fee set forth in Sections 6.1 and 6.2 of the Arrangement Agreement, respectively, are: (i) a payment of liquidated damages which are a genuine pre-estimate of the damages which AOC or Surge, as the case may be, will suffer or incur as a result of the event giving rise to such damages and the resultant termination of the Arrangement Agreement and is not a penalty; and (ii) represents consideration for the disposition to the payee of its rights under the Arrangement Agreement. Each of the Parties irrevocably waives any right it may have to raise as a defence that any such liquidated damages are excessive or punitive. For greater certainty, the Parties agree that the payment of the amounts pursuant to Sections 6.1 and 6.2 of the Arrangement Agreement, respectively, is the sole monetary remedy of the respective Party receiving such payment; provided, however, that this limitation shall not apply in the event of fraud or intentional breach of the Arrangement Agreement by either of the Parties. Nothing herein shall preclude a Party from seeking injunctive relief to restrain any breach or threatened breach of the covenants or agreements set forth in the Arrangement Agreement, the Confidentiality Agreements or otherwise to obtain specific performance of any of such act, covenants or agreements, without the necessity of posting bond or security in connection therewith.

Amendments

The Arrangement Agreement may at any time and from time to time before or after the holding of the AOC Meeting or the Surge Meeting, be amended by written agreement of all of the Parties to the Arrangement Agreement without, subject to Applicable Law, further notice to or authorization on the part of their respective securityholders and any such amendment may, without limitation:

change the time for performance of any of the obligations or acts of the Parties;
waive any inaccuracies or modify any representation or warranty contained in the Arrangement Agreement or in any document delivered pursuant thereto;

waive compliance with or modify any of the covenants contained in the Arrangement Agreement and waive or modify performance of any of the obligations of the Parties; or
waive compliance with or modify any other conditions precedent contained in the Arrangement Agreement, provided that no such amendment reduces or materially adversely affects the consideration to be received by an AOC Shareholder without approval by the affected securityholders given in the same manner as required for the approval of the Arrangement or as may be ordered by the Court.

In addition, the Arrangement Agreement provides that the Plan of Arrangement may be amended as follows:

Surge and AOC may by mutual agreement amend the Plan of Arrangement at any time and from time to time prior to the Effective Time, provided that each such amendment must be: (i) set out in writing; (ii) filed with the Court and, if made following the AOC Meeting approved by the Court; and (iii) communicated to holders of AOC Shares, if and as required by the Court.
Other than as may be required under the Interim Order, any amendment to the Plan of Arrangement may be proposed by AOC or Surge at any time prior to or at the AOC Meeting (provided that the Other Party shall have consented thereto) with or without any other prior notice or communication, and if so proposed and accepted by the Persons voting at the AOC Meeting, shall become part of the Plan of Arrangement for all purposes.
Any amendment to the Plan of Arrangement that is approved by the Court following the AOC Meeting shall be effective only if it is consented to by each of Surge and AOC.

AOC Shareholder Approval

Notwithstanding the foregoing, the AOC Arrangement Resolution authorizes the AOC Board, without further notice to or approval of the AOC Shareholders, subject to the terms of the Plan of Arrangement and the Arrangement Agreement, to amend the Plan of Arrangement or the Arrangement Agreement or to decide not to proceed with the Arrangement at any time prior to the Arrangement becoming effective pursuant to the provisions of the ABCA.

See Appendix A to this Information Circular for the full text of the AOC Arrangement Resolution. See also “ General Proxy Matters – AOC ”.

Surge Shareholder Approval

Pursuant to the rules of the TSX, as the Arrangement will result in the issuance of 25% or more of the currently issued and outstanding Surge Shares on a non-diluted basis, the Surge Issuance Resolution must be approved by a simple majority of the votes cast by the Surge Shareholders present in person or by proxy at the Surge Meeting. An aggregate of up to 229,000,000 Surge Shares are potentially issuable pursuant to the Arrangement, representing approximately 60% of the currently issued and outstanding Surge Shares on a non-diluted basis. The foregoing number includes: (i) 215,892,581 Surge Shares to be issued to former holders of AOC Shares; (ii) 10,379,688 Surge Shares issuable to the former holders of AOC Options which assumes that an additional 3,269,605 AOC Shares are issued from treasury pursuant to the “cashless exercise” of outstanding AOC Options prior to the Effective Time; (iii) 2,619,048 Surge Shares issuable to the former holders of AOC Warrants which assumes that an additional 825,001 AOC Shares are issued from treasury pursuant to the “cashless exercise” of outstanding AOC Warrants prior to the Effective Time; and (iv) an additional 108,683 Surge Shares that could be required to be issued to account for clerical and administrative matters, including to settle fractional entitlements. The Arrangement is not expected to materially affect the control of Surge.

See Appendix B-1 to this Information Circular for the full text of the Surge Issuance Resolution.

Stock Exchange Listing Approval

It is a mutual condition to the completion of the Arrangement that the Surge Shares to be issued to the AOC Shareholders pursuant to the Arrangement are conditionally approved for listing on the TSX. On July 13, 2021, the TSX conditionally accepted the listing of Surge Shares to be issued pursuant to the Arrangement and the Surge Share Consolidation. The listing of Surge Shares will be subject to Surge fulfilling all of the listing requirements of the TSX.

Competition Act Approval

The Arrangement is a “notifiable transaction” for the purposes of Part IX of the Competition Act. When a merger is a notifiable transaction under the Competition Act, a pre-merger notification must be provided to the Commissioner under section 114 of the Competition Act and the transaction may not be completed until either the applicable waiting period under sections 123(1) or 123(2) of the Competition Act has expired or has been terminated, or the Commissioner has waived the obligation to provide the pre-merger notification pursuant to section 113(c) of the Competition Act. Where a pre-merger notification is made, the waiting period is 30 calendar days after the day on which the parties to the transaction submit the pre-merger notification, provided that, before the expiry of this period, the Commissioner has not notified the parties that he requires additional information that is relevant to the Commissioner’s assessment of the transaction (a “ Supplementary Information Request ”). If the Commissioner provides the parties with a Supplementary Information Request, a second waiting period of 30 calendar days begins after compliance with such Supplementary Information Request. After expiry or termination of the relevant waiting period, it is legal for the transaction to be completed, provided that there is no order in effect prohibiting completion at the relevant time.

The Commissioner may, upon application by the parties to a proposed transaction, issue an ARC under section 102 of the Competition Act where he is satisfied that he would not have sufficient grounds on which to apply to the Competition Tribunal (the “ Tribunal ”) for an order under section 92 of the Competition Act challenging the transaction. Further, if the transaction to which the ARC relates is substantially completed within one year after the ARC is issued, the Commissioner cannot seek an order of the Tribunal under section 92 of the Competition Act in respect of the transaction solely on the basis of information that is the same or substantially the same as the information on the basis of which the ARC was issued. Where the Commissioner declines to issue an ARC, he may instead issue a No-Action Letter confirming that he does not, at that time, intend to make an application under section 92 of the Competition Act.

Other than in circumstances where an ARC has been issued, for up to one year after the merger has been substantially completed, the Commissioner may apply to the Tribunal for a remedial order under section 92 of the Competition Act if he is of the view that the transaction is likely to prevent or lessen competition substantially. The Commissioner may also apply to the Tribunal under section 104 of the Competition Act for an injunction to prevent closing of the transaction pending the Tribunal’s determination of the Commissioner’s application for a remedial order under section 92 of the Competition Act. Where a section 92 application has not been made, the Commissioner may also apply to the Tribunal under section 100 of the Competition Act for an injunction to prevent closing, because, in the Commissioner’s opinion, more time is required to complete the inquiry. On application by the Commissioner under section 92 of the Competition Act, the Tribunal may, where it finds that the merger prevents or lessens, or is likely to prevent or lessen, competition substantially, order the merger not proceed or, if completed, order its dissolution or the disposition of assets or shares involved in such merger; in addition to, or in lieu thereof, with the consent of the person against whom the order is directed and the Commissioner, the Tribunal may order a person to take any other action. The Tribunal is prohibited from issuing a remedial order where it finds that the transaction is likely to bring about gains in efficiency that will be greater than, and will offset, the effects of any prevention or lessening of competition that is likely to result from the transaction and that the gains in efficiency would not likely be attained if the order were made.

Completion of the Arrangement is subject to the condition that: (a) the Commissioner shall have issued an ARC; (b) the Parties have given the notice required under section 114 of the Competition Act with respect to the transactions contemplated by the arrangement agreement and the applicable waiting period under section 123 of the Competition Act has expired or been waived in accordance with the Competition Act; or (c) the obligation to submit a notification has been waived pursuant to subsection 113(c) of the Competition Act; provided that in the case of (b) or (c), Surge or AOC have received a No-Action Letter, and the form of and any terms and conditions attached to it are acceptable to the Parties, acting reasonably, and it has not been rescinded or amended.

On July 8, 2021, Surge and AOC jointly requested that the Commissioner issue an ARC under section 102 of the Competition Act or, alternatively, a No-Action Letter and a waiver of the obligation to notify pursuant to section 113(c) of the Competition Act in respect of the Arrangement.

Amendment to Surge Credit Facilities

AOC Fairness Opinion

Pursuant to the AOC Financial Advisory Agreement, AOC engaged NBF as financial advisor in connection with AOC’s strategic review, which mandate also included acting as financial advisor with respect to the Arrangement and providing the AOC Board with an opinion as to whether the Consideration to be received by AOC Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the AOC Shareholders. In connection with this mandate, at a meeting of the AOC Board held to evaluate the Arrangement on June 22, 2021, NBF delivered its oral opinion, which was subsequently confirmed by delivery of the written AOC Fairness Opinion.

The AOC Fairness Opinion states that, in the opinion of NBF, as of the date of the AOC Fairness Opinion and based upon and subject to the assumptions, limitations, qualifications and other matters stated in the AOC Fairness Opinion, the Consideration to be received by AOC Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the AOC Shareholders. The AOC Fairness Opinion is subject to the assumptions, qualifications and limitations contained therein and should be read in its entirety. A complete copy of the AOC Fairness Opinion is attached as Appendix F to this Information Circular.

The AOC Fairness Opinion was prepared at the request of the AOC Board and for the exclusive benefit and use of the AOC Board in connection with its evaluation of the Consideration to be received by AOC Shareholders pursuant to the Arrangement. While the AOC Fairness Opinion is being included in this Information Circular for the information and review of AOC Shareholders, the AOC Fairness Opinion may not be relied upon by any other Person other than the AOC Board.

NBF has not been asked to prepare and has not prepared a formal valuation or appraisal of the securities or assets of AOC or of any of its subsidiaries or affiliates, and the AOC Fairness Opinion should not be construed as such. The AOC Fairness Opinion is not, and should not be construed as, advice as to the price at which the securities of AOC may be sold at any time. NBF was not engaged to review any legal, tax, or

regulatory aspects of AOC or of the Arrangement and the AOC Fairness Opinion does not address any such matters. NBF has relied upon, without independent verification, the assessment by AOC and its legal, tax and regulatory advisors with respect to such matters. In addition, NBF expressed no views as to, and the AOC Fairness Opinion does not address, the relative merits of the Arrangement as compared to any strategic alternatives that may be available to AOC or the decision of the AOC Board to proceed with the Arrangement. The AOC Fairness Opinion was not intended to be and did not constitute a recommendation to the AOC Board, and is not a recommendation to any AOC Shareholder as to how such AOC Shareholder should act or vote on any matters relating to the Arrangement.

The AOC Fairness Opinion addresses only the fairness from a financial point of view of the Consideration to be received by AOC Shareholders, pursuant to the Arrangement. NBF expresses no view or opinion as to any other terms or aspects of the Arrangement.

In deciding to recommend and approve the Arrangement, the AOC Board considered, among other things, the AOC Fairness Opinion. The AOC Fairness Opinion was only one of many factors considered by the AOC Board in evaluating the Arrangement and should not be viewed as determinative of the views of the AOC Board with respect to the Arrangement or the Consideration to be received by AOC Shareholders pursuant to the Arrangement.

Neither NBF nor any of its affiliates or associates is an insider, associate or affiliate (as such terms are defined in the Securities Act) of AOC or Surge or any of their respective associates or affiliates. Neither NBF nor any of its affiliates or associates is acting as an advisor to AOC in connection with any matter, other than acting as a financial advisor to AOC.

Pursuant to the AOC Financial Advisory Agreement, AOC has agreed to pay to NBF a fixed fee for delivery of the AOC Fairness Opinion, which is not contingent upon the conclusions reached in the AOC Fairness Opinion and is payable whether or not the Arrangement is completed. AOC has also agreed to pay fees to NBF that are contingent on the completion of the Arrangement in connection with the other financial advisory services provided, to reimburse NBF for reasonable expenses incurred on behalf of AOC for certain matters and for any of NBF’s legal expenses relating to the AOC Fairness Opinion, and to indemnify, among others, NBF in respect of certain liabilities as may be incurred by it in connection with their engagement.

The summary of the AOC Fairness Opinion described in this Information Circular is qualified in its entirety by reference to the full text of the AOC Fairness Opinion, which is attached as Appendix F to this Information Circular. The AOC Board urges AOC Shareholders to read the AOC Fairness Opinion carefully and in its entirety.

Procedure for Exchange of AOC Share Certificates

Registered AOC Shareholders (other than Dissenting AOC Shareholders) must duly complete and return an AOC Letter of Transmittal together with the certificate(s) representing their AOC Shares and all other required documents to the Depositary at one of the offices specified in the AOC Letter of Transmittal. In the event that the Arrangement is not completed, such certificates will be promptly returned to AOC Shareholders who provided such certificates to the Depositary.

Enclosed with this Information Circular is an AOC Letter of Transmittal which, when properly completed and returned together with the certificate(s) representing AOC Shares and all other required documents, will enable each AOC Shareholder to obtain the consideration that the AOC Shareholder is entitled to receive under the Arrangement. Assuming completion of the Surge Share Consolidation as set forth in this Information Circular, AOC Shareholders will not be required to take any further action to obtain the Surge Shares that they are entitled to receive pursuant to the Surge Share Consolidation (other than the completion of the AOC Letter of Transmittal as set forth herein and therein).

The AOC Letter of Transmittal contains complete instructions on how to exchange AOC Shares for Surge Shares. From and after the Effective Time, certificates formerly representing AOC Shares shall represent only the right to receive the consideration to which the former AOC Shareholders are entitled under the Arrangement. As soon as practicable following the later of the Effective Date and the date of deposit by a former holder of AOC Shares acquired by Surge under the Arrangement of a duly completed AOC Letter of Transmittal, and the certificates representing such AOC Shares and all other required documents, the Depositary shall either: (a) e-mail; (b) forward by first class mail to such former holder at the address specified in the AOC Letter of Transmittal; or (c) if requested by such AOC Shareholder in the AOC Letter of Transmittal to make available or cause to be made available at the Depositary for pickup by such AOC Shareholder, one or more certificates or DRS Statements representing the number of Surge Shares issued to such AOC Shareholder under the Arrangement.

No DRS Statements representing fractional Surge Shares will be issued under the Arrangement. In the event that an AOC Shareholder would otherwise be entitled to a fractional Surge Share thereunder, the number of Surge Shares issued to such AOC Shareholder shall be rounded up to the next greater whole number of Surge Shares if the fractional entitlement is equal to or greater than 0.5 and shall, without any additional compensation, be rounded down to the next lesser whole number of Surge Shares if the fractional entitlement is less than 0.5. In calculating such fractional interests, all AOC Shares registered in the name of an AOC Shareholder or its nominee shall be aggregated.

AOC Shareholders whose AOC Shares are registered in the name of a broker, dealer, bank, trust company or other nominee must contact their nominee to deposit their AOC Shares.

The use of mail to transmit certificates representing AOC Shares or the AOC Letter of Transmittal is at each Registered Holder’s risk. AOC recommends that such certificates and documents be delivered by hand to the Depositary and a receipt therefor be obtained or that registered mail be used and appropriate insurance be obtained.

If an AOC Letter of Transmittal is executed by a person other than the Registered Holder of the AOC Shares being exchanged or if the DRS Statement(s) representing Surge Shares are to be issued in exchange therefor are to be issued to a person other than the registered owner(s) or sent to an address other than the address of the Registered Holder(s) as shown on the register of AOC Shareholders maintained by the applicable registrar and transfer agent, the signature on the AOC Letter of Transmittal must be medallion guaranteed by an Eligible Institution (as defined in the AOC Letter of Transmittal and Surge Letter of Transmittal). If the AOC Letter of Transmittal is executed by a person other than the registered owner(s) of the AOC Shares and in certain other circumstances as set forth in the applicable AOC Letter of Transmittal, then the certificate(s) representing the AOC Shares must be endorsed or be accompanied by an appropriate transfer power of attorney duly and properly completed by the registered owner(s). The signature(s) on the endorsement panel or the transfer power of attorney must correspond exactly to the name(s) of the registered owner(s) as registered or as appearing on the certificate(s) or must be medallion guaranteed by an Eligible Institution.

All questions as to validity, form, eligibility (including timely receipt), and acceptance of any AOC Shares exchanged pursuant to the Arrangement will be determined by Surge in its sole discretion. Depositing AOC Shareholders agree that such determination shall be final and binding. Surge reserves the absolute right to reject any and all deposits which it determines not to be in proper form or which may be unlawful for it to accept under the laws of any jurisdiction. Surge reserves the absolute right to waive any defect or irregularity in the exchange of AOC Shares. There shall be no duty or obligation on Surge, the Depositary or any other person to give notice of any defect or irregularity in any deposit of AOC Shares and no liability shall be incurred by any of them for failure to give such notice.

Notwithstanding the provisions of this Information Circular and the AOC Letter of Transmittal, DRS Statements representing Surge Shares representing the consideration to be received pursuant to the Arrangement will not be mailed if Surge determines that delivery thereof by mail may be delayed. Persons entitled to DRS Statements which are not mailed for such reason may take delivery thereof at the office of the Depositary in which the deposited certificates or DRS Advices representing AOC Shares were originally deposited until such time that it is determined that the delivery by mail will no longer be delayed.

AOC Shareholders are encouraged to deliver a validly completed and duly executed AOC Letter of Transmittal, as applicable, together with the relevant security certificate(s) to the Depositary as soon as possible.

None of AOC, Surge or the Depositary are liable for failure to notify AOC Shareholders, nor do they have any obligation to notify AOC Shareholders, who make a deficient deposit with the Depositary.

AOC Shareholders whose AOC Shares are registered in the name of an Intermediary, which may include a broker, dealer, bank, trust company or other nominee, must contact such Intermediary to deposit their AOC Shares.

Lost Securities

If any certificate which immediately prior to the Effective Time represented an interest in one or more outstanding AOC Shares that was transferred or cancelled pursuant to the Plan of Arrangement has been lost, stolen or destroyed, upon satisfying such reasonable requirements as may be imposed by Surge and the Depositary in relation to the issuance of replacement share certificates, the Depositary will issue and deliver in exchange for such lost, stolen or destroyed certificate the consideration to which the holder is entitled pursuant to the Arrangement (and any dividends or distributions with respect thereto) as determined in accordance with the Arrangement, deliverable in accordance with such holder’s AOC Letter of Transmittal. The Person who is entitled to receive such consideration shall, as a condition precedent to the receipt thereof, give a bond satisfactory to each of Surge, AOC and their respective transfer agents in such form as is satisfactory to Surge, AOC and their respective transfer agents, or shall otherwise indemnify Surge, AOC and their respective transfer agents, to the reasonable satisfaction of such parties, against any claim that may be made against any of them with respect to the certificate alleged to have been lost, stolen or destroyed. Alternatively, an AOC Shareholder may replace his, her or its AOC Shares by following the instructions contained in the AOC Letter of Transmittal.

Withholding Rights

Surge, Amalco, Amalco1, and AOC shall be entitled to deduct and withhold (or cause to be deducted and withheld) such amounts as may be required to be deducted or withheld by Applicable Laws from any Consideration otherwise payable or deliverable to any holder of AOC Shares or, as to AOC Shares held by a Dissenting AOC Shareholder, the fair value payable or deliverable in respect of the Dissenting AOC Shareholder’s AOC Shares, in the manner contemplated by the Plan of Arrangement. To the extent that amounts are so deducted or withheld, such withheld amounts will be treated as having been paid to the holder of the securities in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate authority. Surge, Amalco, Amalco1, and AOC are permitted to sell or otherwise dispose of such portion of the Consideration as is necessary to provide sufficient funds to Surge, Amalco, Amalco1, and AOC to enable it to comply with such deduction or withholding requirement.

AOC Dissent Rights

The following description of the AOC Dissent Rights to which registered AOC Shareholders are entitled is not a comprehensive statement of the procedures to be followed by a Dissenting AOC Shareholder who seeks payment of the fair value of such Dissenting AOC Shareholder’s AOC Shares and is qualified in its entirety by the reference to the full text of the Interim Order, Plan of Arrangement and the text of Section 191 of the ABCA, which are attached to this Information Circular as Appendix E, Exhibit “A” to Appendix D and Appendix I, respectively. A Dissenting AOC Shareholder who intends to exercise the right to dissent and appraisal should carefully consider and comply with the provisions of the ABCA, as modified by the Plan of Arrangement and by the Interim Order. Failure to adhere to the procedures established therein may result in the loss of all rights thereunder. Accordingly, each Dissenting AOC Shareholder who might desire to exercise AOC Dissent Rights should consult its own legal advisor.

A Court hearing the application for the Final Order has the discretion to alter the AOC Dissent Rights described herein based on the evidence presented at such hearing. Subject to certain tests as described below, pursuant to the Interim Order, Dissenting AOC Shareholders are entitled, in addition to any other right such Dissenting AOC Shareholder may have, to dissent and to be paid by Surge the fair value of the AOC Shares held by such Dissenting AOC Shareholder in respect of which such Dissenting AOC Shareholder dissents, determined as of the close of business on the last Business Day before the day on which the AOC Arrangement Resolution was adopted. A Dissenting AOC Shareholder may dissent only with respect to all of the AOC Shares held by such Dissenting AOC Shareholder or on behalf of any one Beneficial Shareholder registered in the Dissenting AOC Shareholder’s name. Only registered AOC Shareholders may dissent. Persons who are Beneficial Shareholders of AOC Shares registered in the name of an Intermediary who wish to dissent should be aware that they may only do so through the registered owner of such AOC Shares. A registered AOC Shareholder, such as a broker, who holds AOC Shares as nominee for Beneficial Shareholders, some of whom wish to dissent, must exercise the AOC Dissent Right on behalf of a Beneficial Shareholder with respect to all of the AOC Shares held for such Beneficial Shareholder. In such case, the demand for dissent should set forth the number of AOC Shares covered by it.

Dissenting AOC Shareholders must provide a written objection to the AOC Arrangement Resolution to AOC, c/o Burnet, Duckworth & Palmer LLP, Suite 2400, 525 – 8th Avenue S.W., Calgary, Alberta T2P 1G1, Attention: Ryan Algar, to be received by no later than 8:30 a.m. (Calgary time) on the second Business Day immediately preceding the date of the AOC Meeting. No AOC Shareholder who has voted in favour of the AOC Arrangement Resolution shall be entitled to AOC Dissent Rights with respect to the Arrangement.

Surge or a Dissenting AOC Shareholder may apply to the Court, by way of an origination application, after the approval of the AOC Arrangement Resolution, to fix the fair value of the Dissenting AOC Shareholder’s AOC Shares. If such an application is made to the Court by either Surge or a Dissenting AOC Shareholder, Surge must, unless the Court orders otherwise, send to each Dissenting AOC Shareholder a written offer to pay the Dissenting AOC Shareholder an amount, considered by the Surge Board, to be the fair value of the AOC Shares held by such Dissenting AOC Shareholders. The offer, unless the Court orders otherwise, must be sent to each Dissenting AOC Shareholder at least 10 days before the date on which the application is returnable, if Surge is the applicant, or within 10 days after Surge is served a copy of the origination application, if a Dissenting AOC Shareholder is the applicant. Every offer will be made on the same terms to each Dissenting AOC Shareholder of AOC Shares and contain or be accompanied with a statement showing how the fair value was determined.

A Dissenting AOC Shareholder may make an agreement with Surge for the purchase of such holder’s AOC Shares in the amount of the offer made by Surge, or otherwise, at any time before the Court pronounces an order fixing the fair value of the AOC Shares.

A Dissenting AOC Shareholder will not be required to give security for costs in respect of an application and, except in special circumstances, will not be required to pay the costs of the application or appraisal. On the application, the Court will make an order fixing the fair value of the AOC Shares of all Dissenting AOC Shareholders who are parties to the application, giving judgment in that amount against Surge and in favour of each of those Dissenting AOC Shareholders, and fixing the time within which Surge must pay the amount payable to each Dissenting AOC Shareholder calculated from the date on which the Dissenting AOC Shareholder ceases to have any rights as an AOC Shareholder, until the date of payment.

On the Arrangement becoming effective, or upon the making of an agreement between Surge and the Dissenting AOC Shareholder as to the payment to be made to the Dissenting AOC Shareholder, or upon the pronouncement of a Court order, whichever first occurs, the Dissenting AOC Shareholder will cease to have any rights as an AOC Shareholder other than the right to be paid the fair value of such holder’s AOC Shares in the amount agreed to or in the amount of the judgment, as the case may be. Until one of these events occurs, the Dissenting AOC Shareholder may withdraw the Dissenting AOC Shareholder’s dissent, or if the Arrangement has not yet become effective, AOC may rescind the AOC Arrangement Resolution, and in either event, the dissent and appraisal proceedings in respect of that Dissenting AOC Shareholder will be discontinued.

Surge shall not make a payment to a Dissenting AOC Shareholder under Section 191 of the ABCA if there are reasonable grounds for believing that it is or would after the payment be unable to pay its liabilities as they become due, or that the realizable value of its assets would thereby be less than the aggregate of its liabilities. In such event, it shall notify each Dissenting AOC Shareholder that it is unable lawfully to pay Dissenting AOC Shareholders for their AOC Shares, in which case the Dissenting AOC Shareholder may, by written notice to AOC within 30 days after receipt of such notice, withdraw such holder’s written objection, in which case the holder shall be deemed to have participated in the Arrangement as an AOC Shareholder. If the Dissenting AOC Shareholder does not withdraw such holder’s written objection, such Dissenting AOC Shareholder retains status as a claimant against Surge to be paid as soon as Surge is lawfully entitled to do so or, in a liquidation, to be ranked subordinate to the rights of creditors of Surge but in priority to its shareholders.

All AOC Shares held by Dissenting AOC Shareholders who exercise their AOC Dissent Rights will, if the holders do not otherwise withdraw such holder’s written objection, be deemed to be transferred to Surge under the Arrangement, and cancelled in exchange for the fair value thereof or will, if such Dissenting AOC Shareholders ultimately are not so entitled to be paid the fair value thereof, be treated as if the holder had participated in the Arrangement on the same basis as a non dissenting holder of AOC Shares and such AOC Shareholder’s AOC Shares will be deemed to be exchanged for Surge Shares on the same basis as all other AOC Shareholders.

The above summary does not purport to provide a comprehensive statement of the procedures to be followed by Dissenting AOC Shareholders who seek payment of the fair value of their AOC Shares. Section 191 of the ABCA, other than as amended by the Plan of Arrangement and the Interim Order, requires adherence to the procedures established therein and failure to do so may result in the loss of all rights thereunder. Accordingly, Dissenting AOC Shareholders who might desire to exercise the right to dissent and appraisal should carefully consider and comply with the provisions of Section 191 of the ABCA, as modified by the Plan of Arrangement and the Interim Order, the full text of which is set out in Appendix I, Exhibit “A” to Appendix D and Appendix E of this Information Circular, respectively, and consult their own legal advisor.

Interests of Certain Persons or Companies in the Arrangement

AOC

In considering the recommendation of the AOC Board with respect to the Arrangement, AOC Shareholders should be aware that certain members of AOC’s management and the AOC Board have certain interests in connection with the Arrangement, including those referred to below and elsewhere in this Information Circular, that may present them with actual or potential conflicts of interest in connection with the Arrangement. The AOC Board are aware of these interests and considered them along with the other matters described above in “ The Arrangement – Background to and Reasons for the Arrangement ”.

AOC Share Ownership

As of July 16, 2021, the directors and officers of AOC and their associates and affiliates, as a group, beneficially owned, directly or indirectly, or exercised control or direction over, an aggregate of approximately 47,746,845 AOC Shares (not including AOC Shares issuable pursuant to AOC Options or AOC Warrants held or controlled by directors and officers of AOC), representing approximately 70.2% of the outstanding AOC Shares. See Appendix G – “ Information Concerning AOC ” for additional information on AOC’s capitalization.

All of the AOC Shares held by directors and officers of AOC will be treated in the same fashion under the Arrangement as AOC Shares held by any other AOC Shareholder. Immediately after giving effect to the Arrangement, and assuming the exercise of all “in-the-money” AOC Options and AOC Warrants held by directors and officers of AOC, it is anticipated that the directors and officers of AOC and their associates and affiliates, as a group, would beneficially own, directly or indirectly, or exercise control or direction over, an aggregate of approximately 162,163,973 Surge Shares representing approximately 27% of the Surge Shares which are expected to be outstanding upon completion of the Arrangement.

AOC Options and AOC Warrants

Details of the AOC Options and AOC Warrants beneficially owned, or controlled or directed, directly or indirectly, by each director and officer of AOC are set forth below under the heading “ Summary of Equity Ownership ”.

Surge Share Ownership

The directors and officers of AOC or their associates and affiliates beneficially own, or exercise control or direction over, directly or indirectly, 15,940,739 Surge Shares or 4% of the issued and outstanding Surge Shares as of the date of the Information Circular.

Director and Officer Insurance

AOC and Surge have agreed that prior to the Effective Time, AOC shall purchase customary “tail” policies of directors’ and officers’ liability insurance providing protection no less favourable in the aggregate to the protection provided by the policies maintained by AOC which are in effect immediately prior to the Effective Date and providing protection in respect of claims arising from facts or events which occurred on or prior to the Effective Date and Surge will, or will cause AOC to, maintain such tail policies in effect without any reduction in scope or coverage for six years from the Effective Date.

Termination Payments

Pursuant to their employment arrangements, certain of AOC’s officers are entitled to termination payments triggered by the completion of the Arrangement (an “ AOC Termination Payment ”).

Other Interests

Other than as set forth in Appendix D – “ Information Concerning AOC ” under the heading “ Interest of Management and Others in Material Transactions ”, no director or officer of AOC or any associate or affiliate of any of the foregoing Persons, has or had any material interest in any transaction in the last three years or any proposed transaction that materially affected, or will materially affect, AOC or any of its affiliates, except as disclosed above or elsewhere in this Information Circular or in the documents incorporated into this Information Circular by reference.

AOC has retained NBF as financial advisor with respect to the Arrangement and NBF has provided the AOC Fairness Opinion to the AOC Board. NBF will receive financial advisory fees from AOC for provision of financial advice in connection with the Arrangement and the AOC Fairness Opinion.

Surge

None of the directors and officers of Surge or their associates and affiliates beneficially own, or exercise control or direction over, directly or indirectly, any AOC Shares.

Surge has retained Scotiabank to act as financial advisor to Surge with respect to the Arrangement. Scotiabank will receive fees from Surge for provision of financial advice in connection with the Arrangement.

James M. Pasieka, counsel at McCarthy Tétrault LLP, is the Chair of the Surge Board and Michael J. Bennett, a partner at McCarthy Tétrault LLP, is the Corporate Secretary of Surge. McCarthy Tétrault LLP acts as legal advisor to Surge, including in acting on Surge’s behalf in respect of the Arrangement, and receives fees for services rendered in that capacity.

Expenses of the Arrangement

The costs to be incurred by AOC with respect to the Arrangement and related matters including, without limitation, fees and expenses, severance costs, costs and expenses incurred in connection with the legal and other professional fees and disbursements are estimated at approximately $6.5 million, which includes the AOC Financial Advisory Fees.

The costs to be incurred by Surge with respect to the Arrangement and related matters including, without limitation, fees and expenses, costs and expenses incurred in connection with the legal, accounting and other professional fees and disbursements are estimated at approximately $2.0 million, which includes the fees payable to Scotiabank pursuant to the engagement agreement between Surge and Scotiabank.

Securities Law Matters

Canada

Surge Shares issuable to AOC Shareholders in exchange for their AOC Shares under the Arrangement will be issued in reliance on exemptions from prospectus and registration requirements of Canadian securities laws of the various applicable provinces in Canada and will generally not be subject to any restrictions or hold period if the following conditions are met: (i) Surge is and has been a reporting issuer in a jurisdiction of Canada for the four months immediately preceding the trade of such Surge Shares; (ii) the trade is not a “control distribution” (as defined in Canadian securities laws); (iii) no unusual effort is made to prepare the market or to create a demand for the securities that are the subject of the trade; (iv) no extraordinary commission or consideration is paid to a Person in respect of the trade; and (v) if the selling holder of Surge Shares is an insider or an officer of Surge, the selling securityholder has no reasonable grounds to believe that Surge is in default of securities legislation.

United States

The Surge Shares issuable to AOC Shareholders in exchange for their AOC Shares (and any post-amalgamation Surge Shares deemed, for purposes of the U.S. Securities Act, to be issuable to holders of pre-amalgamation Surge Shares) under the Arrangement have not been and will not be registered under the U.S. Securities Act, and such securities will be issued in reliance upon the exemption from the registration requirements of the U.S. Securities Act provided by Section 3(a)(10) thereof. Section 3(a)(10) of the U.S. Securities Act exempts the issuance of securities issued in exchange for one or more bona fide outstanding securities from the general requirement of registration where the terms and conditions of the issuance and exchange of such securities have been approved by a court of competent jurisdiction, after a hearing upon the fairness of the terms and conditions of the issuance and exchange at which all Persons to whom the securities will be issued have the right to appear and receive timely notice thereof. The Court is authorized to conduct a hearing at which the fairness of the terms and conditions of the Arrangement will be considered. All AOC Shareholders and Surge Shareholders are entitled to appear and be heard at this hearing, provided that they satisfy the applicable conditions set forth in the Interim Order. The Court granted the Interim Order on July 15, 2021 and, subject to the approval of the AOC Arrangement Resolution by AOC Shareholders, a hearing on the Arrangement will be held on August 17, 2021 by the Court. See “ The Arrangement – Court Approvals – Final Order ” above.

The Surge Shares to be received by AOC Shareholders upon completion of the Arrangement may be resold without restrictions under the U.S. Securities Act, except by Persons who are “affiliates” of Surge after the Effective Date or who have been affiliates of Surge or AOC within 90 days before the Effective Date. Persons who may be deemed to be “affiliates” of an issuer generally include individuals or entities that control, are controlled by, or are under common control with, the issuer, whether through the ownership of voting securities, by contract or otherwise, and generally include executive officers and directors of the issuer as well as principal shareholders of the issuer. Any resale of such Surge Shares by such an affiliate (or, if applicable, former affiliate) may be subject to the registration requirements of the U.S. Securities Act and applicable state securities laws, absent an exemption therefrom. Subject to certain limitations, such affiliates (and former affiliates) may immediately resell such Surge Shares outside the United States without registration under the U.S. Securities Act pursuant to Regulation S under the U.S. Securities Act. Such Surge Shares may also be resold in transactions completed in accordance with Rule 144 under the U.S. Securities Act, if available.

The foregoing discussion is only a general overview of certain requirements of U.S. Securities Act applicable to the resale of Surge Shares received by current AOC Shareholders upon completion of the Arrangement. All holders of such Surge Shares are urged to consult with their own counsel to ensure that the resale of their Surge Shares complies with applicable U.S. federal and state securities laws.

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

In the opinions of McCarthy Tétrault LLP, counsel to Surge, and Burnet, Duckworth & Palmer LLP, counsel to AOC (together, the “ Tax Counsel ”), the following summary describes the principal Canadian federal income tax considerations in respect of (i) the exchange of AOC Shares pursuant to the Arrangement, (ii) the holding of Surge Shares received pursuant to the Arrangement, and (iii) the amalgamation of Surge and Amalco1 to form Amalco on holders of Surge Shares. This summary is generally applicable to a beneficial owner of AOC Shares who, at all relevant times, for purposes of the ITA, (1) deals at arm’s length with AOC and Surge; (2) is not affiliated with AOC or Surge; and (3) holds the AOC Shares, and will hold any Surge Shares received under the Arrangement, as capital property (an “ AOC Shareholder ”). This summary is also generally applicable to a current beneficial owner of Surge Shares who, at all relevant times, for purposes of the ITA, (1) deals at arm’s length with AOC and Surge; (2) is not affiliated with AOC or Surge; and (3) holds its Surge Shares as capital property (a “ Surge Shareholder ”).Generally, the AOC Shares and Surge Shares will be capital property to an owner provided the owner does not hold such shares in the course of carrying on a business or as part of an adventure or concern in the nature of trade. This summary does not address all issues relevant to shareholders who acquired their AOC Shares on the exercise of an employee stock option, an AOC Warrant or other employment compensation arrangement. Such shareholders should consult their own tax advisors.

This summary is based on the facts set out in this Information Circular, the current provisions of the ITA, and on counsel’s understanding of the current administrative policies and assessing practices of the CRA published in writing prior to the date hereof. This summary takes into account all specific proposals to amend the ITA publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “ Proposed Amendments ”) and assumes that all Proposed Amendments will be enacted in the form proposed. However, no assurances can be given that the Proposed Amendments will be enacted as proposed, or at all. This summary does not otherwise take into account or anticipate any changes in law or administrative policy or assessing practice whether by legislative, regulation, administrative or judicial action nor does it take into account tax legislation or considerations of any province, territory or foreign jurisdiction, which may differ from those discussed herein.

For the purpose of this summary, it is assumed that AOC Shares and Surge Shares currently derive, directly or indirectly, more than 50% of their fair market value from one or any combination of real or immovable property situated in Canada and “Canadian resource properties” (as defined in the ITA).

This summary is not applicable to an AOC Shareholder or Surge Shareholder (i) that is a “specified financial institution”, (ii) an interest in which is a “tax shelter investment”, (iii) that is, for purposes of certain rules (referred to as the mark-to-market rules) applicable to securities held by financial institutions, a “financial institution”, (iv) that reports its “Canadian tax results” in a currency other than Canadian currency, (v) that has entered or enters into, with respect to any of the shares discussed herein, a “derivative forward agreement” or “synthetic disposition

arrangement” (as defined in the ITA), (vi) who, immediately following the completion of the exchange of its AOC Shares for Surge Shares pursuant to the Arrangement, either alone or together with other Persons with whom such shareholder does not deal at arm’s length, controls Surge or beneficially owns Surge Shares which have a fair market value in excess of 50% of the fair market value of all of the outstanding Surge Shares, (vii) who is or was an employee of AOC and who acquired AOC Shares in respect of, in the course of, or by virtue of, their employment, including pursuant to an employee stock option, (viii) who is exempt from taxation under Part I of the ITA, or (ix) is a foreign affiliate of a taxpayer resident in Canada. Such AOC Shareholders and Surge Shareholders should consult their own tax advisors.

This summary is of a general nature only and is not, and is not intended to be, legal or tax advice to any particular shareholder. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, shareholders should consult their own tax advisors having regard to their own particular circumstances.

AOC Shareholders Resident in Canada

This portion of the summary is generally applicable to an AOC Shareholder who, at all relevant times, for purposes of the ITA and any applicable income tax convention, is, or is deemed to be, resident in Canada (a “ Resident AOC Shareholder ”). Certain Resident AOC Shareholders may be entitled to make or may have already made the irrevocable election permitted by subsection 39(4) of the ITA, the effect of which is to deem any AOC Shares and Surge Shares (and any other “Canadian security”, as defined in the ITA) owned by such Resident AOC Shareholder in the taxation year in which the election is made and in all subsequent taxation years to be capital property. Where a Resident AOC Shareholder makes an election with Surge under section 85 of the ITA, the Surge Shares received may not be “Canadian securities” to such holder and may not be deemed to be capital property under subsection 39(4) of the ITA. Resident AOC Shareholders whose shares might not otherwise be considered to be capital property should consult their own tax advisors concerning this election.

Participation in the Arrangement – No Section 85 Election

Resident AOC Shareholders Receiving Surge Shares for AOC Shares

A Resident AOC Shareholder (other than a Resident Dissenting Holder) who disposes of AOC Shares under the Arrangement and receives Surge Shares for such AOC Shares will generally not realize a capital gain (or a capital loss) on such disposition except where:

such Resident AOC Shareholder has included any portion of the capital gain or capital loss otherwise determined from the disposition of such AOC Shares in that Resident AOC Shareholder’s income for purposes of the ITA, for the year in which the disposition occurred; or
such Resident AOC Shareholder and Surge have filed a Section 85 Election as described below with respect to such AOC Shares.

Pursuant to section 85.1 of the ITA, such Resident AOC Shareholder will be deemed to have disposed of each such AOC Share for proceeds of disposition equal to the adjusted cost base thereof immediately before the Effective Time and to have acquired the Surge Shares at a cost equal to such adjusted cost base. This cost will be averaged with the adjusted cost base of all other Surge Shares held by the Resident AOC Shareholder as capital property at the Effective Time for the purposes of determining the adjusted cost base of each Surge Share held by the Resident AOC Shareholder.

Notwithstanding the foregoing, a Resident AOC Shareholder who receives Surge Shares in exchange for their AOC Shares may, if the Resident AOC Shareholder so chooses and does not make a Section 85 Election as described below, recognize a capital gain (or a capital loss) in respect of such exchange by reporting the same in their income tax return for the taxation year during which the exchange occurs. Such capital gain (or capital loss) will be equal to the amount by which the fair market value of the Surge Shares received exceeds (or is exceeded by) the aggregate of the adjusted cost base of the AOC Shares exchanged, as determined immediately before the Effective Time, and any reasonable costs of disposition. In such circumstances, the cost of the Surge Shares acquired will be equal to the fair market value thereof. This cost will be averaged with the adjusted cost base of all other Surge Shares held by such Resident AOC Shareholder as capital property at the Effective Time for the purpose of determining the adjusted cost base of each Surge Share held by such Resident AOC Shareholder. Such capital gain (or capital loss) will be subject to the tax treatment described below under “ Taxation of Capital Gains and Capital Losses ”.

Participation in the Arrangement – With a Section 85 Election

A Resident AOC Shareholder is entitled to make a joint election with Surge pursuant to section 85 of the ITA (a “ Section 85 Election ”), and may thereby defer all or a portion of the capital gain (or capital loss) that would otherwise be recognized for purposes of the ITA in respect of the exchange of AOC Shares for Surge Shares under the Arrangement, depending on the Elected Amount (as defined below), the Resident AOC Shareholder’s adjusted cost base of the AOC Shares at the time of the exchange, and subject to the Section 85 Election requirements being met under the ITA.

A Resident AOC Shareholder making a Section 85 Election will be required to designate an amount (the “ Elected Amount ”) in the election form that will be deemed to be the proceeds of disposition of the Resident AOC Shareholder’s AOC Shares. In general, the Elected Amount may not be:

less than the lesser of (i) the Resident AOC Shareholder’s adjusted cost base of the AOC Shares, and (ii) the fair market value of the AOC Shares, in each case determined at the time of the exchange;
greater than the fair market value of the AOC Shares at the time of the exchange.

An Elected Amount specified by a Resident AOC Shareholder that does not comply with these limitations will automatically be adjusted under the ITA so that it is in compliance, and the amount so adjusted will be deemed to be the Elected Amount for purposes of such Section 85 Election.

The Canadian federal income tax treatment to a Resident AOC Shareholder who properly makes a valid Section 85 Election jointly with Surge generally will be as follows:

the Resident AOC Shareholder will be deemed to have disposed of the Resident AOC Shareholder’s AOC Shares for proceeds of disposition equal to the Elected Amount;
if the Elected Amount exceeds the Resident AOC Shareholder’s adjusted cost base of the AOC Shares, then the Resident AOC Shareholder will realize a capital gain equal to such excess less any reasonable costs of disposition;
if the Resident AOC Shareholder’s adjusted cost base of the AOC Shares exceeds the Elected Amount, then the Resident AOC Shareholder will realize a capital loss equal to such excess; and
the aggregate cost to the Resident AOC Shareholder of the Surge Shares acquired on the exchange will equal the Elected Amount, and for the purpose of determining the Resident AOC Shareholder’s adjusted cost base of those Surge Shares, such cost will be averaged with the Resident AOC Shareholder’s adjusted cost base of all other Surge Shares, if any, held as capital property at the Effective Time.

A Resident AOC Shareholder who intends to make a Section 85 Election should provide two signed copies of the necessary election forms to Surge within 120 days following the Effective Date, duly completed with the details of the number of AOC Shares transferred and the Elected Amount. The relevant federal tax election form is CRA form T2057 (or, if the Resident AOC Shareholder is a partnership, CRA form T2058), which will be made available on Surge’s website within 60 days of the Effective Date. Certain provincial jurisdictions require that a separate joint election be filed for provincial income tax purposes. Resident AOC Shareholders should consult their own tax advisors to determine whether they must file separate election forms with any provincial taxing jurisdiction. It is the responsibility of each Resident AOC Shareholder who wishes to make an election for provincial income tax purposes to obtain any necessary provincial election forms. In addition, special compliance rules apply where the AOC Shares are held in joint ownership or are held as partnership property, and affected Resident AOC Shareholders should consult their own tax advisors to determine all relevant filing requirements and procedures (including under provincial legislation) applicable in their particular circumstances.

The election form or forms will be signed by Surge and returned to such Resident AOC Shareholder within 60 days after the receipt thereof by Surge for filing with the CRA (or the applicable provincial or territorial Taxing Authority). None of AOC, Surge or any successor corporation, will be responsible for the proper completion of any election form or for the payment of any late filing penalty. Except for the obligation of Surge to so sign and return duly completed election forms which are received by Surge within 120 days of the Effective Date, Surge will not be responsible for any taxes, interest or penalties resulting from the failure by a Resident AOC Shareholder to properly complete or file the election forms in the form and manner and within the time prescribed by the ITA (or any applicable provincial or territorial legislation). In its sole discretion, Surge may choose to sign and return an election form received by it more than 120 days following the Effective Date, but Surge will have no obligation to do so.

Each Resident AOC Shareholder is urged to consult the Resident AOC Shareholder’s own advisors as soon as possible respecting the deadlines applicable to the Resident AOC Shareholder’s particular circumstances. Resident AOC Shareholders may be required to forward their tax election forms to Surge earlier than 120 days after the Effective Date in order to avoid late filing penalties.

All Resident AOC Shareholders who wish to make a Section 85 Election should give immediate attention to this matter and in particular should consult their own tax advisors without delay. Resident AOC Shareholders are referred to CRA Information Circular 76-19R3 and CRA Interpretation Bulletin IT-291R3 for further information respecting the Section 85 Election. The comments herein with respect to such elections are provided for general assistance only. The law in this area is complex and contains numerous technical requirements not addressed in this summary.

Taxation of Capital Gains and Losses

Generally, one-half of any capital gain (a “ taxable capital gain ”) realized by a Resident AOC Shareholder in a taxation year must be included in the Resident AOC Shareholder’s income for the year, and one-half of any capital loss (an “ allowable capital loss ”) realized by a Resident AOC Shareholder in a taxation year must be deducted from taxable capital gains realized by the Resident AOC Shareholder in that year. Allowable capital losses for a taxation year in excess of taxable capital gains for that year may, generally, be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in any subsequent taxation year against net taxable capital gains realized in such years, to the extent and under the circumstances described in the ITA.

The amount of any capital loss realized by a Resident AOC Shareholder that is a corporation on the disposition of Surge Shares or AOC Shares may be reduced by the amount of dividends received or deemed to be received by the Resident AOC Shareholder on such shares (or on shares for which the shares have been substituted) to the extent and under the circumstances described by the ITA. Similar rules may apply where a corporation is a member of a partnership or a beneficiary of a trust that owns Surge Shares or AOC Shares, directly or indirectly, through a partnership or a trust.

A Resident AOC Shareholder that, throughout the relevant taxation year, is a “Canadian-controlled private corporation” (as defined in the ITA) may be liable to pay a refundable tax on its “aggregate investment income” (as defined in the ITA), including taxable capital gains.

Lifetime Capital Gains Deduction

A Resident AOC Shareholder who is an individual (other than a trust) and who was resident in Canada for purposes of the ITA throughout the year, may be entitled to a deduction in computing taxable income for the year in respect of up to $446,109 of taxable capital gains ($892,218 of capital gains) realized on the disposition or deemed disposition of AOC Shares under the Arrangement in the year if such shares are “qualified small business corporation shares” (“ QSBC Shares ”), as defined in the ITA, of the Resident AOC Shareholder at the time of disposition or deemed disposition and if certain other requirements in the ITA are satisfied.

For an AOC Share that is disposed of under the Arrangement to be a QSBC Share of the Resident AOC Shareholder, certain conditions must be met, including, in general terms, that (a) throughout the 24 months immediately preceding the disposition, the AOC Share was not owned by anyone other than the Resident AOC Shareholder, the individual’s spouse or common-law partner, blood relative, person related through adoption or partnership related, for purposes of the ITA, to the Resident AOC Shareholder, (b) throughout the 24 months up to and including the disposition of the AOC Share, AOC was a “Canadian-controlled private corporation” as defined in the ITA, (c) throughout the 24 months immediately preceding the disposition of the AOC Share, more than 50% of the fair market value of AOC’s assets was attributable to (i) assets that are used principally in an “active business”, as defined in the ITA, carried on primarily in Canada by AOC or a corporation related to AOC, (ii) shares or indebtedness of certain corporations that are “connected”, as defined in the definition of “qualified small business corporation share” in subsection 110.6(1) of the ITA, with AOC and that (1) throughout that part of the 24 months immediately preceding the disposition that ends at the time AOC acquired such a share or indebtedness, the share or indebtedness was not owned by anyone other than AOC, a person or partnership related, for purposes of the ITA, to AOC or a person or partnership related, for purposes of the ITA, to such a person or partnership, and (2) throughout that part of the 24 months immediately preceding the disposition while such a share or indebtedness was owned by AOC, a person or partnership related, for purposes of the ITA, to AOC or a person or partnership related, for purposes of the ITA, to such a person or partnership, it was a share or indebtedness of a “Canadian-controlled private corporation” as defined by the ITA more than 50% of the fair market value of the assets of which was attributable to assets described in (i), (ii) or (iii) assets described in (i) or (ii), and (d) at the time of the disposition, all or substantially all of the fair market value of AOC’s assets is attributable to (i) assets that are used principally in an “active business”, as defined in the ITA, carried on primarily in Canada by AOC or a corporation related to AOC, (ii) shares or indebtedness of one or more “small business corporations”, as defined in the ITA, that are “connected”, as defined in the definition of “small business corporation” in subsection 248(1) of the ITA, with AOC at the time of the disposition, or (iii) assets described in (i) and (ii).

AOC has represented to Tax Counsel that it satisfies the conditions referred to in (b), (c) and (d) above. On that basis, AOC Shares may constitute QSBC Shares to a Resident AOC Shareholder who is an individual (other than a trust) and who satisfies the condition referred to in (a) above.

Whether and to what extent such a Resident AOC Shareholder may be entitled to utilize the capital gains deduction in respect of QSBC Shares will depend upon the Resident AOC Shareholder’s particular circumstances. The $446,109 limit referred to above will be reduced to the extent that a Resident AOC Shareholder previously has utilized the capital gains deduction. In addition, the amount of any net capital gains in respect of the capital gains deduction that may be claimed should be reduced by the Resident AOC Shareholder’s “cumulative net investment losses”, as defined in the ITA, and the capital gains deduction may be limited if the Resident AOC Shareholder has claimed any “allowable business investment losses”, as defined in the ITA. There are specific requirements that must be met by a Resident AOC Shareholder in filing his or her tax return in order to claim the capital gains deduction. If these reporting requirements are not complied with, the capital gains deduction may be denied. In some cases, a capital gains deduction may result in alternative minimum tax being payable. Various other requirements for the capital gains deduction exist. Resident AOC Shareholders who are considering utilizing the capital gains deduction should consult with their own tax advisors for specific advice having regard to their particular circumstances.

Amalgamation of Acquisitionco and AOC to form Amalco1

The amalgamation of Acquisitionco and AOC will generally not have any Canadian federal income tax consequences to a Resident AOC Shareholder.

Amalgamation of Surge and Amalco1 to form Amalco

On the amalgamation of Surge and Amalco1, each Resident AOC Shareholder will generally be deemed to have disposed of all of its Surge Shares for proceeds of disposition equal to its aggregate adjusted cost base of those Surge Shares, and will be deemed to have acquired its shares of Amalco (being Surge Shares as each Surge Share shall survive and shall continue to be an issued and outstanding common share in the capital of Amalco, without amendment, upon completion of the Arrangement) at a cost equal to such aggregate adjusted cost base.

Consequences of Resident AOC Shareholders Owning Surge Shares After the Arrangement

Dividends received or deemed to be received on Surge Shares held by a Resident AOC Shareholder will be included in the Resident AOC Shareholder’s income for the purposes of the ITA.

Such dividends received by a Resident AOC Shareholder that is an individual (other than certain trusts) will be subject to the gross-up and dividend tax credit rules in the ITA normally applicable to taxable dividends received from taxable Canadian corporations, including the enhanced gross-up and dividend tax credit in respect of dividends designated by Surge as “eligible dividends”. There may be limitations on Surge’s ability to designate dividends as “eligible dividends”.

Taxable dividends received by a Resident AOC Shareholder who is an individual (other than certain trusts) may result in such Resident AOC Shareholder being liable for alternative minimum tax under the ITA. Resident AOC Shareholders who are individuals should consult their own tax advisors in this regard.

In the case of a Resident AOC Shareholder that is a corporation, the amount of any taxable dividend will be included in computing its income and generally will be deductible in computing the Resident AOC Shareholder’s taxable income. A Resident AOC Shareholder that is a “private corporation” or “subject corporation” (as such terms are defined in the ITA) may be liable under Part IV of the ITA to pay a refundable tax on dividends received or deemed to be received on the Surge Shares to the extent such dividends are deductible in computing the Resident AOC Shareholder’s taxable income. In certain circumstances, subsection 55(2) of the ITA will treat a taxable dividend received or deemed to be received by a Resident AOC Shareholder that is a corporation as proceeds of disposition or a capital gain. Resident AOC Shareholders that are corporations should consult their own tax advisors having regard to their own circumstances.

Consequences of Resident AOC Shareholders Disposing of Surge Shares After the Arrangement

A future disposition or a deemed disposition of a Surge Share by a Resident AOC Shareholder (other than in a tax-deferred disposition, or a disposition to Surge unless purchased by Surge in the open market in the manner in which shares are normally purchased by any member of the public in the open market) will generally result in the Resident AOC Shareholder realizing a capital gain (or capital loss) in the year of the disposition equal to the amount by which the proceeds of disposition of the Surge Share exceed (or is less) than the aggregate of the Resident AOC Shareholder’s adjusted cost base thereof and any reasonable costs of disposition. The adjusted cost base of a Surge Share to a Resident AOC Shareholder generally will be the average of the cost of all Surge Shares held at the particular time by such Resident AOC Shareholder as capital property. Such capital gain (or capital loss) will be subject to the tax treatment described above under “ Taxation of Capital Gains and Capital Losses ”.

Resident Dissenting Holders

The following portion of this summary applies to Resident AOC Shareholders that are Dissenting AOC Shareholders (“ Resident Dissenting Holders ”).

A Resident Dissenting Holder that properly exercises Dissent Rights in respect of its AOC Shares will, pursuant to the Plan of Arrangement, be deemed to have transferred such AOC Shares to Surge and will be entitled to be paid the fair value of such AOC Shares by Surge. See “ The Arrangement – AOC Dissent Rights ”. Such Resident Dissenting Holder will be considered to have disposed of its AOC Shares for proceeds of disposition equal to the amount received by it from Surge (other than that portion that is in respect of interest, if any, awarded by the Court), and will realize a capital gain (or capital loss) to the extent that the proceeds of disposition of its AOC Shares exceed (or are less than) the aggregate of the adjusted cost base to the Resident Dissenting Holder of such AOC Shares and any reasonable costs of disposition. Generally, a Resident Dissenting Holder’s adjusted cost base of an AOC Share will include any amount paid to acquire the AOC Share. Any such capital gain or capital loss will be subject to the same tax treatment as described above under the heading “ Certain Canadian Federal Income Tax Considerations – AOC Shareholders Resident in Canada – Taxation of Capital Gains and Capital Losses ”.

Interest, if any, awarded by the Court to a Resident Dissenting Holder will be included in the Resident Dissenting Holder’s income for the purposes of the ITA. In addition, a Resident Dissenting Holder that, throughout the relevant taxation year, is a “Canadian-controlled private corporation” as defined in the ITA may be liable for an additional refundable tax in respect of such interest.

Under the Plan of Arrangement, AOC Shareholders who for any reason are not entitled to be paid the fair value of their AOC Shares, shall be treated as if they had participated in the Arrangement on the same basis as AOC Shareholders who do not exercise Dissent Rights. The principal Canadian federal income tax considerations generally applicable to such AOC Shareholders who are Resident AOC Shareholders in connection with their AOC Shares will be the same as those described above in connection with Resident AOC Shareholders who do not exercise Dissent Rights.

Resident Dissenting Holders should consult their own tax advisors for specific advice with respect to the tax consequences in their own particular circumstances of exercising their Dissent Rights.

Eligibility for Investment

Provided the Surge Shares are listed on a “designated stock exchange” within the meaning of the ITA (which includes the TSX) or if Surge or its successor Amalco is otherwise a “public corporation” for purposes of the ITA on the Effective Date, Surge Shares, on such date, will be qualified investments under the ITA for registered retirement savings plans (“ RRSPs ”), registered retirement income funds (“ RRIFs ”), deferred profit sharing plans, registered disability savings plans (“ RDSPs ”), registered education savings plans (“ RESPs ”) and tax-free savings accounts (“ TFSAs ”).

Notwithstanding the foregoing, the holder of a TFSA or RDSP, an annuitant under a RRSP or RRIF or the subscriber of an RESP, as the case may be, that holds Surge Shares will be subject to a penalty tax if such shares are a “prohibited investment” for the purposes of the ITA. Surge Shares will generally not be a “prohibited investment” if the holder, the annuitant or subscriber, as the case may be, deals at arm’s length with Surge for the purposes of the ITA and the holder, the annuitant or subscriber, as the case may be, does not have a “significant interest” (within the meaning of the ITA) in Surge. AOC Shareholders that intend to hold their Surge Shares in a TFSA, RRSP, RRIF, RDSP or RESP are urged to consult their own tax advisors.

AOC Shareholders Not Resident in Canada

This portion of the summary is applicable to an AOC Shareholder who, at all relevant times, is not, or is deemed not to be, resident in Canada for purposes of the ITA (including a partnership that is not a “Canadian partnership” for purposes of the ITA) and any applicable income tax treaty or convention to which Canada is a party and who does not use or hold, and is not deemed to use or hold, AOC Shares in connection with carrying on a business in Canada (a “ Non-Resident AOC Shareholder ”).

AOC Shares and Surge Shares as “Taxable Canadian Property” to Non-Resident AOC Shareholders

For a Non-Resident AOC Shareholder to be subject to tax under the ITA on any capital gain realized on the disposition or deemed disposition of AOC Shares or Surge Shares under the Arrangement, such AOC Shares or Surge Shares must be or be deemed to be “taxable Canadian property”, as defined in the ITA, to the Non-Resident AOC Shareholder at the time of disposition or deemed disposition and not constitute “treaty-protected property”, as defined in the ITA.

An AOC Share will be a taxable Canadian property to a Non-Resident AOC Shareholder for purposes of the ITA at the time of the disposition or deemed disposition thereof if at any particular time during the 60-month period that ends at the time of the disposition or deemed disposition more than 50% of the fair market value of such AOC Share will have been derived directly or indirectly (otherwise than through a corporation, partnership, or trust the shares or interests in which were not themselves taxable Canadian property at the time) from one or any combination of (i) real or immovable property situated in Canada, (ii) “Canadian resource properties”, as defined in the ITA, (iii) “timber resource properties”, as defined in the ITA, and (iv) options in respect of, or interests in, property described in any of (i) to (iii), whether or not the property exists. For the purposes of this summary, it is assumed that an AOC Share currently derives more than 50% of its fair market value from such property. Such shares also may be deemed to be taxable Canadian property to a Non-Resident AOC Shareholder in certain other circumstances described under the ITA.

A Surge Share will generally not be a taxable Canadian property to a Non-Resident AOC Shareholder for the purposes of the ITA at the time of the disposition or deemed disposition thereof, provided the Surge Shares are then listed on a designated stock exchange (which currently includes the TSX), unless at any time during the 60-month period immediately preceding the disposition the following two conditions are met concurrently: (a) the Non-Resident AOC Shareholder, persons with which the Non-Resident AOC Shareholder does not deal at arm’s length, partnerships whose members include, either directly or indirectly through one or more partnerships, the Non-Resident AOC Shareholder or persons which do not deal at arm’s length with the Non-Resident AOC Shareholder, or any combination of them, owned 25% or more of the issued shares of any class or series of shares of the capital stock of Surge, and (b) more than 50% of the fair market value of the Surge Shares was derived directly or indirectly, from one or any combination of real or immovable property situated in Canada, “Canadian resource properties”, “timber resource properties” (each as defined in the Tax Act), and options in respect of or interests in, or for civil law rights in, any such property (whether or not such property exists). Such shares may also be deemed to be “taxable Canadian property” of a Non-Resident AOC Shareholder in certain other circumstances described under the ITA.

Amalgamation of Acquisitionco and AOC to form Amalco1

A Non-Resident AOC Shareholder who receives Surge Shares pursuant to the amalgamation of Acquisitionco and AOC will generally be deemed to have disposed of its AOC Shares for proceeds of disposition equal to the aggregate adjusted cost base of those AOC Shares, and will be deemed to have acquired the Surge Shares at a cost equal to such aggregate adjusted cost base. This cost will be averaged with the adjusted cost base of all other Surge Shares held by such Non-Resident AOC Shareholder as capital property for the purpose of determining the adjusted cost base of each Surge Share held by the Non-Resident AOC Shareholder.

In accordance with CRA administrative policy, each Non-Resident AOC Shareholder who is deemed to dispose of its AOC Shares as a result of the amalgamation of Acquisitionco and AOC under the Arrangement will not be required to (i) give notice of the disposition to the CRA by filing CRA form T2062 and (ii) apply for a clearance certificate pursuant to section 116 of the ITA.

If an AOC Share constitutes “taxable Canadian property”, any Surge Shares received by such Non-Resident AOC Shareholder in exchange for that AOC Share will be deemed to constitute “taxable Canadian property” to such Non-Resident AOC Shareholder for the 60-month period that commences on the Effective Date.

Amalgamation of Surge and Amalco1 to form Amalco

Non-Resident AOC Shareholders will generally be deemed to have disposed of their Surge Shares for proceeds of disposition equal to the aggregate adjusted cost base of those Surge Shares, and will be deemed to have acquired their shares of Amalco (being Surge Shares as each Surge Share shall survive and shall continue to be an issued and outstanding common share in the capital of Amalco, without amendment, upon completion of the Arrangement) at a cost equal to such aggregate adjusted cost base.

In accordance with CRA administrative policy, each Non-Resident AOC Shareholder who is deemed to dispose of its Surge Shares as a result of the amalgamation of Surge and Amalco1 under the Arrangement will not be required to (i) give notice of the disposition to the CRA by filing CRA form T2062 and (ii) apply for a clearance certificate pursuant to section 116 of the ITA.

If a Surge Share constitutes “taxable Canadian property”, any shares of Amalco (being Surge Shares as each Surge Share shall survive and shall continue to be an issued and outstanding common share in the capital of Amalco, without amendment, upon completion of the Arrangement) received by such Non-Resident AOC Shareholder in exchange for that Surge Share will be deemed to constitute “taxable Canadian property” to such Non-Resident AOC Shareholder for the 60-month period that commences on the Effective Date. Consequently, the Surge Shares received by Non-Resident AOC Shareholders on the completion of the Arrangement will be deemed to be taxable Canadian property for the 60-month period beginning on the Effective Date.

Consequences of Non-Resident AOC Shareholders Owning Surge Shares After the Arrangement

Any dividends, if any, paid or credited, or deemed to be paid or credited, on Surge Shares to a Non-Resident AOC Shareholder will be subject to Canadian withholding tax at the rate of 25% of the gross amount of the dividend unless the rate is reduced under the provisions of an applicable income tax convention between Canada and the Non-Resident AOC Shareholder’s country of residence. For instance, where the Non-Resident AOC Shareholder is a resident of the United States that is entitled to full benefits under the Canada United States Income Tax Convention (1980) as amended and is the beneficial owner of the dividends, the rate of Canadian withholding tax applicable to dividends is generally reduced to 15%.

Consequences of Non-Resident AOC Shareholders Disposing of Surge Shares After the Arrangement

For a Non-Resident AOC Shareholder to be subject to tax under the ITA on any capital gain realized on the disposition or deemed disposition of Surge Shares, such Surge Shares must be or be deemed to be “taxable Canadian property”, as defined in the ITA, to the Non-Resident AOC Shareholder at the time of disposition or deemed disposition and not constitute “treaty-protected property”, as defined in the ITA.

If the Surge Shares owned by the Non-Resident AOC Shareholder were received pursuant to the Arrangement and as a result of the amalgamation of (i) Acquisitionco and AOC to form Amalco1 or (ii) Surge and Amalco1 to form Amalco, then such Surge Shares will be deemed to be “taxable Canadian property” to the Non-Resident AOC Shareholder at any time during the 60 month period after the Effective Date.

In circumstances where the Surge Shares constitute “taxable Canadian property” to a Non-Resident AOC Shareholder, the tax consequences of a disposition thereof will generally be as described above under the heading “ AOC Shareholders Resident in Canada – Taxation of Capital Gains and Capital Losses ”.

Dissenting Non-Resident AOC Shareholders

A Non-Resident AOC Shareholder who is a Dissenting AOC Shareholder (a “ Non-Resident Dissenting Holder ”) and who is paid the fair value of such Non-Resident Dissenting Holder’s AOC Shares by Surge shall be deemed to have been disposed of such shares to Surge.

To the extent that the Non-Resident Dissenting Holder’s proceeds of disposition exceed (or are less than) the aggregate of the adjusted cost base to the Non-Resident Dissenting Holder of such AOC Shares plus reasonable disposition costs, the Non-Resident Dissenting Holder will realize a capital gain (or a capital loss). See the section above under the heading “ AOC Shareholders Resident in Canada - Taxation of Capital Gains and Capital Losses ”.

Each Non-Resident Dissenting Holder who is deemed to dispose of its AOC Shares under the Arrangement to Surge will be required to give notice of the deemed disposition to the CRA by filing CRA form T2062 and apply for a clearance certificate pursuant to section 116 of the ITA. Failure to notify the CRA of the disposition of their AOC Shares by a Non-Resident Dissenting Holder within 10 days of the deemed disposition can give rise to the assessment of penalties and interest against such Non-Resident Dissenting Holder. These notification obligations arise even where no Canadian tax will be payable because, for example, the disposition gives rise to a capital loss or a relevant tax treaty applies to exempt the disposition from taxation in Canada. Non-Resident Dissenting Holders are referred to CRA Information Circular 72-17R6 for further information with respect to obtaining a clearance certificate pursuant to section 116 of the ITA.

Surge will be required to withhold and remit a portion of the consideration for the deemed disposition to the Receiver General for Canada. The amount withheld and remitted may be reduced if the Non-Resident Dissenting Holder obtains a clearance certificate from the CRA pursuant to section 116 of the ITA and delivers a copy of that clearance certificate to Surge prior to the Effective Date. Unless the Non-Resident Dissenting Holder provides security or remits a deposit to the CRA in respect of the potential Canadian income taxes owing as part of obtaining such clearance certificate, the amount withheld and remitted by Surge will be equal to 25% of the difference between the consideration for the deemed disposition and the amount specified on the clearance certificate provided, if any, to Surge by the Non-Resident Dissenting Holder. On the 30th day following the month in which the Effective Date occurs, Surge will remit the withheld amount to the Receiver General for Canada for the account of the Non-Resident Dissenting Holder.

Under the Plan of Arrangement, AOC Shareholders who for any reason are not entitled to be paid the fair value of their AOC Shares, shall be treated as if they had participated in the Arrangement on the same basis as AOC Shareholders who do not exercise Dissent Rights. The principal Canadian federal income tax considerations generally applicable to such AOC Shareholders who are Non-Resident AOC Shareholders in connection with their AOC Shares will be the same as those described above in connection with Non-Resident AOC Shareholders who do not exercise Dissent Rights.

Any interest awarded by the Court and paid or credited to a Non-Resident Dissenting Holder generally will not be subject to Canadian withholding tax.

Other Canadian Filings

A Non-Resident AOC Shareholder who disposes of taxable Canadian property, like an AOC Share or a Surge Share, will be required to file a Canadian income tax return for the taxation year that includes the disposition of the property by such Non-Resident AOC Shareholder. Where amounts have been withheld and remitted to the Receiver General for Canada by a person or by Surge or the Depositary as described above on account of the Non-Resident AOC Shareholder’s tax liability, the Non-Resident AOC Shareholder may be entitled to obtain a refund of all or a portion of the amount withheld by filing a Canadian income tax return as and when required by the ITA. Non-Resident AOC Shareholders are urged to seek professional advice having regard to their particular circumstances.

Surge Shareholders Resident in Canada

This portion of the summary is generally applicable to a Surge Shareholder who, at all relevant times, for purposes of the ITA and any applicable income tax convention, is, or is deemed to be, resident in Canada (a “ Resident Surge Shareholder ”). Certain Resident Surge Shareholders may be entitled to make or may have already made the irrevocable election permitted by subsection 39(4) of the ITA, the effect of which is to deem any Surge Shares (and any other “Canadian security”, as defined in the ITA) owned by such Resident Surge Shareholder in the taxation year in which the election is made and in all subsequent taxation years to be capital property. Resident Surge Shareholders whose shares might not otherwise be considered to be capital property should consult their own tax advisors concerning this election.

The consequences described above in “ AOC Shareholders Resident in Canada – Amalgamation of Acquisitionco and AOC to Form Amalco1”, “ AOC Shareholders Resident in Canada – Amalgamation of Surge and Amalco1 to form Amalco”, “AOC Shareholders Resident in Canada – Consequences of Resident AOC Shareholders Owning Surge Shares After the Completion of the Arrangement”, “AOC Shareholders Resident in Canada – Consequences of Resident AOC Shareholders Disposing of Surge Shares After the Completion of the Arrangement”, and “AOC Shareholders Resident in Canada – Eligibility for Investment” will generally apply to Resident Surge Shareholders.

Surge Shareholders Not Resident in Canada

This portion of the summary is applicable to an Surge Shareholder who, at all relevant times, is not, or is deemed not to be, resident in Canada for purposes of the ITA (including a partnership that is not a “Canadian partnership” for purposes of the ITA) and any applicable income tax treaty or convention to which Canada is a party and who does not use or hold, and is not deemed to use or hold, Surge Shares in connection with carrying on a business in Canada (a “ Non-Resident Surge Shareholder ”).

The consequences described above in “ AOC Shareholders Not Resident in Canada – AOC Shares and Surge Shares as “Taxable Canadian Property” to Non-Resident AOC Shareholders”, “ AOC Shareholders Not Resident in Canada – Amalgamation of Surge and Amalco1 to form Amalco”, “AOC Shareholders Not Resident in Canada – Consequences of Non-Resident AOC Shareholders Owning Surge Shares After the Completion of the Arrangement”, “AOC Shareholders Not Resident in Canada – Consequences of Non-Resident AOC Shareholders Disposing of Surge Shares After the Arrangement”, and “AOC Shareholders Not Resident in Canada – Other Canadian Filings” will generally apply to Non-Resident Surge Shareholders.

Amalgamation of Acquisitionco and AOC to form Amalco1

The amalgamation of Acquisitionco and AOC will generally not have any Canadian federal income tax consequences to a Non-Resident Surge Shareholder.

Consolidation of Surge Shares

If the Surge Share Consolidation is approved, a Surge Shareholder will not realize a capital gain or capital loss as a result of the Surge Share Consolidation. The aggregate adjusted cost base to a Surge Shareholder of all Surge Shares received as a result of such consolidation will be the same as the aggregate adjusted cost base of such Surge Shareholder’s Surge Shares immediately before such consolidation. Immediately after the Surge Share Consolidation, each individual Surge Share will have a higher cost basis than each individual Surge Share immediately before the Surge Share Consolidation.

Other Tax Considerations

This Information Circular does not address any tax considerations of the Arrangement other than certain Canadian federal income tax considerations described in “ Certain Canadian Federal Income Tax Considerations ” above. AOC Shareholders and Surge Shareholders who are resident in or otherwise subject to taxation in jurisdictions other than Canada should consult their tax advisors with respect to the tax implications of the Arrangement, including any associated filing requirements, in such jurisdictions and with respect to the tax implications in such jurisdictions of owning Surge Shares after the completion of the Arrangement. AOC Shareholders and Surge Shareholders should also consult their own tax advisors regarding provincial, state or territorial tax considerations of the Arrangement or of holding Surge Shares.

RISK FACTORS

Completion of the Arrangement is subject to certain risks. In addition to the risk factors described under the heading “ Risk Factors ” in the Surge AIF, which are specifically incorporated by reference into this Information Circular, and in Appendix G – “ Information Concerning AOC ” and Appendix H – “Information Concerning Surge ” attached hereto, the following are additional and supplemental risk factors which AOC Shareholders and Surge Shareholders should carefully consider before making a decision to respectively approve the AOC Arrangement Resolution and Surge Issuance Resolution, respectively. Additionally, following completion of the Arrangement, Surge will be subject to certain risk factors described herein in addition to those risk factors described under the heading “ Risk Factors ” in each of the Surge Financial

Statements and the Surge AIF, which are specifically incorporated by reference into this Information Circular, and in Appendix H – “Information Concerning Surge ” and Appendix G – “ Information Concerning AOC ” attached hereto, which should also be carefully considered by AOC Shareholders and Surge Shareholders before making a decision to respectively approve the AOC Arrangement Resolution and Surge Issuance Resolution, respectively.

Risk Factors Related to the Arrangement

AOC and Surge may not satisfy all regulatory requirements or obtain the necessary approvals for completion of the Arrangement on satisfactory terms or at all.

Completion of the Arrangement is subject to the approval of the Court, the satisfaction of certain regulatory requirements and the receipt of all necessary regulatory approvals (including the Competition Act Approval), AOC Shareholder approval, Surge Shareholder approval and third party consents, including the approval of the TSX and approval of Surge’s lenders in respect of the Surge Credit Facilities. There can be no certainty, nor can either Party provide any assurance, that these conditions will be satisfied or, if satisfied, when they will be satisfied. The requirement to take certain actions or to agree to certain conditions to satisfy such requirements or obtain any such approvals may have a Material Adverse Effect on the business and affairs of Surge or the trading price of Surge Shares, after completion of the Arrangement.

The Arrangement Agreement may be terminated in certain circumstances, including in the event of a Material Adverse Change with respect to AOC or Surge.

Each of AOC and Surge has the right to terminate the Arrangement Agreement in certain circumstances. Accordingly, there is no certainty, nor can either Party provide any assurance, that the Arrangement Agreement will not be terminated before the completion of the Arrangement. For example, a Party has the right, in certain circumstances, to terminate the Arrangement Agreement if a Material Adverse Change occurs with respect to the Other Party. Although a Material Adverse Change excludes certain events that are beyond the control of the Parties, there is no assurance that a change constituting a Material Adverse Change in a Party will not occur before the Effective Date, in which case the Other Party could elect to terminate the Arrangement Agreement and the Arrangement would not proceed.

The market price for the Surge Shares may decline.

If the Surge Issuance Resolution is not approved by the Surge Shareholders or the AOC Arrangement Resolution is not approved by the AOC Shareholders, the market price of the Surge Shares may decline to the extent that the current market price of the Surge Shares reflects a market assumption that the Arrangement will be completed. If the AOC Arrangement Resolution is not approved by the AOC Shareholders, the Surge Issuance Resolution is not approved by the Surge Shareholders or the AOC Board decides to seek another business combination, there can be no assurance that Surge will be able to find a transaction as attractive to Surge as the Arrangement.

There are risks related to the integration of AOC’s and Surge’s existing businesses.

The ability to realize the benefits of the Arrangement including, among other things, those set forth in this Information Circular under “ The Arrangement – Background to and Reasons For the Arrangement – Reasons For the Arrangement ” above, will depend, in part, on successfully consolidating functions and integrating operations and procedures in a timely and efficient manner, as well as on Surge’s ability to realize the anticipated growth opportunities and synergies from integrating AOC’s and Surge’s businesses following completion of the Arrangement. This integration will require the dedication of substantial management effort, time and resources which may divert management’s focus and resources from other strategic opportunities available to Surge following completion of the Arrangement, and from operational matters during this process. The integration process may result in the loss of key employees and the disruption of ongoing business and employee relationships that may adversely affect the ability of Surge to achieve the anticipated benefits of the Arrangement.

Surge and AOC expect to incur significant costs associated with the Arrangement.

Surge and AOC will collectively incur significant direct transaction costs in connection with the Arrangement. Actual direct transaction costs incurred in connection with the Arrangement may be higher than expected. Moreover, certain of AOC’s and Surge’s costs related to the Arrangement, including legal, financial advisory services, accounting, printing and mailing costs, must be paid even if the Arrangement is not completed.

If the Arrangement is not completed AOC’s future business and operations could be harmed.

If the Arrangement is not completed AOC may be subject to a number of additional material risks, including the following:

AOC may have lost other opportunities that would have otherwise been available had the Arrangement Agreement not been executed, including, without limitation, opportunities not pursued as a result of affirmative and negative covenants made by it in the Arrangement Agreement, such as covenants affecting the conduct of its business outside the ordinary course of business;
AOC may be unable to obtain additional sources of financing or conclude another sale, merger, amalgamation or other business combination on as favourable terms, in a timely manner, or at all; and
the obligations of AOC to pay damages to Surge in connection with a Surge Damages Event pursuant to the terms of the Arrangement Agreement in certain circumstances.

If the Arrangement is not completed Surge’s future business and operations could be harmed.

If the Arrangement is not completed Surge may be subject to a number of additional material risks, including the following:

Surge may have lost other opportunities that would have otherwise been available had the Arrangement Agreement not been executed, including, without limitation, opportunities not pursued as a result of affirmative and negative covenants made by it in the Arrangement Agreement, such as covenants affecting the conduct of its business outside the ordinary course of business;
Surge may be unable to obtain additional sources of financing, including in respect of the Surge Credit Facilities, or conclude another sale, merger, amalgamation or other business combination on as favourable terms, in a timely manner, or at all;
There is no certainty that the borrowing base of the Surge Credit Facilities will not be reduced or that the lenders under the Surge Credit Facilities will not demand repayment of amounts outstanding under such credit facility (see “ Risk Factors – Risk Factors Related to Surge Following Completion of the Arrangement “); and
the obligations of Surge to pay damages to AOC in connection with an AOC Damages Event pursuant to the terms of the Arrangement Agreement in certain circumstances.

The Surge Shares issued in connection with the Arrangement may have a market value different than expected.

Each AOC Shareholder (other than Dissenting AOC Shareholders) will receive 3.1746 Surge Shares for each AOC Share held (prior to and without assuming the completion of the Surge Share Consolidation). Because the exchange ratio will not be adjusted to reflect any changes in the market value of Surge Shares, the market values of the Surge Shares and the AOC Shares at the Effective Time may vary significantly from the values at the date of this Information Circular, including as a result of the Surge Share Consolidation. If the market price of Surge Shares declines, the value of the consideration received by AOC Shareholders will decline as well. Variations may occur as a result of changes in, or market perceptions of changes in, the business, operations or prospects of Surge, market assessments of the likelihood the Arrangement will be consummated, regulatory considerations, general market and economic conditions, changes in the prices of oil and natural gas and other factors over which neither AOC nor Surge has control.

AOC Dissent Rights.

AOC Shareholders have the right to exercise AOC Dissent Rights and demand payment of the fair value of their AOC Shares in cash in connection with the Arrangement in accordance with the ABCA as may be modified by the Interim Order. If there are a significant number of AOC Shareholders who exercise AOC Dissent Rights, a substantial cash payment may be required to be made to such AOC Shareholders that could have an adverse effect on Surge’s financial condition and cash resources if the Arrangement is completed or alternatively, if AOC Shareholders holding 5% or more of the outstanding AOC Shares exercise AOC Dissent Rights, Surge may elect not to complete the Arrangement.

AOC has not verified the reliability of the information regarding Surge included in, or which may have been omitted from, this Information Circular.

All historical information regarding Surge contained in this Information Circular, including all Surge financial information, has been provided by Surge. Although AOC has no reason to doubt the accuracy or completeness of such information, any inaccuracy or material omission in the information about or relating to Surge contained in this Information Circular could result in unanticipated liabilities or expenses, increase the cost of integrating the companies or adversely affect the operational plans of Surge and its results of operations and financial condition.

Surge has not verified the reliability of the information regarding AOC included in, or which may have been omitted from, this Information Circular.

All historical information regarding AOC contained in this Information Circular, including all AOC financial information, has been provided by AOC. Although Surge has no reason to doubt the accuracy or completeness of such information, any inaccuracy or material omission in the information about or relating to AOC contained in this Information Circular could result in unanticipated liabilities or expenses, increase the cost of integrating the companies or adversely affect the operational plans of AOC and its results of operations and financial condition.

Risk Factors Related to Surge Following Completion of the Arrangement

Potential Undisclosed Liabilities Associated with the Arrangement.

In connection with the Arrangement, there may be liabilities that Surge failed to discover or was unable to quantify in its due diligence, which it conducted prior to the execution of the Arrangement Agreement and Surge may not be indemnified for some or all of these liabilities.

Operational, Environmental and Reserves Risks Relating to the AOC Assets.

The risk factors set forth in the Surge AIF relating to the oil and natural gas business, environmental and the operations and reserves of Surge apply equally in respect of the assets of AOC that Surge is acquiring pursuant to the Arrangement. In particular, the reserve and recovery information contained in the AOC Reserve Report in respect of the subject assets are only an estimate and the actual production from and ultimate reserves of those properties may be greater or less than the estimate contained in such reports.

Nature of Acquisitions.

Acquisitions of oil and gas properties or companies are based in large part on engineering, environmental and economic assessments made by the acquiror, independent engineers and consultants. These assessments include a series of assumptions regarding such factors as recoverability and marketability of oil and natural gas, environmental restrictions and prohibitions regarding releases and emissions of various substances, future prices of oil and gas and operating costs, future capital expenditures and royalties and other government levies which will be imposed over the producing life of the reserves. Many of these factors are subject to change and are beyond the control of Surge. All such assessments involve a measure of geologic, engineering, environmental and regulatory uncertainty that could result in lower production and reserves or higher operating or capital expenditures than anticipated. Although select title and environmental reviews are conducted prior to any purchase of resource assets, such reviews cannot guarantee that any unforeseen defects in the chain of title will not arise to defeat Surge’s title to certain assets or that environmental defects, liabilities or deficiencies do not exist or are greater than anticipated. Such deficiencies or defects could adversely affect the value of the AOC Assets and the Surge Shares.

Reserves Replacement.

Surge’s oil and natural gas reserves and production, and therefore its cash flows and earnings, will be highly dependent upon Surge developing and increasing its current reserve base, including the assets of AOC should the Arrangement be completed, and discovering or acquiring additional reserves. Without the addition of reserves through exploration, acquisition or development activities, Surge’s reserves and production will decline over time as reserves are depleted. To the extent that cash flow from operations is insufficient and external sources of capital become limited or unavailable, Surge’s ability to make the necessary capital investments to maintain and expand its oil and natural gas reserves will be impaired. There can be no assurance that Surge will be able to find and develop or acquire additional reserves to replace production at commercially feasible costs.

Risk Factors related to the Surge Share Consolidation

The market price for the Surge Shares may decline.

The effect of the Surge Share Consolidation upon the market price of the Surge Shares cannot be predicted with any certainty, and the history of share consolidations for corporations similar to Surge is varied. There can be no assurance that the total market capitalization of the Surge Shares immediately following the Surge Share Consolidation will be equal to or greater than the total market capitalization immediately before the Surge Share Consolidation. In addition, there can be no assurance that the per-share market price of the Surge Shares following the Surge Share Consolidation will remain higher than the per-share trading price immediately before the Surge Share Consolidation or equal or exceed the direct arithmetical result of the Surge Share Consolidation. In addition, a decline in the trading price of the Surge Shares after the Surge Share Consolidation may result in a greater percentage decline than would occur in the absence of the Surge Share Consolidation.

Increased costs for certain Surge Shareholders.

Furthermore, while the Surge Share Consolidation is expected to generally reduce transaction costs for investors, it may lead to an increase in the number of current Surge Shareholders who will hold “odd lots” of Surge Shares; that is, a number of Surge Shares not evenly divisible into “board lots” (a board lot is either 100, 500 or 1,000 shares, depending on the price of the shares). As a general rule, the cost to shareholders transferring an odd lot of Surge Shares is somewhat higher than the cost of transferring a board lot. As a result, transaction costs associated with transferring Surge Shares may be increased for certain Surge Shareholders that hold an odd lot of Surge Shares following the Surge Share Consolidation.

INTERESTS OF EXPERTS

Certain legal matters relating to the Arrangement will be passed upon by Burnet, Duckworth & Palmer LLP on behalf of AOC. As at July 16, 2021, the partners and associates of Burnet, Duckworth & Palmer LLP owned, directly or indirectly, in aggregate, less than 1% of the outstanding AOC Shares and less than 1% of the outstanding Surge Shares.

Certain legal matters relating to the Arrangement will be passed upon by McCarthy Tétrault LLP on behalf of Surge. As at July 16, 2021, the partners, counsel and associates of McCarthy Tétrault LLP owned, directly or indirectly, in aggregate, less than 1% of the outstanding Surge Shares and less than 1% of the outstanding AOC Shares. James M. Pasieka, counsel at McCarthy Tétrault LLP, is the Chair of the Surge Board and Michael J. Bennett, a partner at McCarthy Tétrault LLP, is the Corporate Secretary of Surge.

Certain reserves data included or incorporated herein by reference into this Information Circular has been prepared by Sproule in respect of each of AOC and Surge. As of the date hereof, Sproule does not have any registered or beneficial interest, direct or indirect, in any securities or other property of AOC or Surge, or any of their associates or affiliates.

Scotiabank was retained by the Surge Board in a financial advisory role in respect of the Arrangement. As at July 16, 2021, Scotiabank owned, directly or indirectly, in aggregate, less than 1% of the outstanding Surge Shares and less than 1% of the outstanding AOC Shares.

NBF was retained by AOC to provide the AOC Fairness Opinion. As of the date hereof, NBF does not have any registered or beneficial interest, direct or indirect, in any securities or other property of AOC or any of its associates or affiliates.

The Surge Financial Statements have been incorporated by reference in this Information Circular. KPMG LLP, the independent auditor of Surge, has advised that they are independent with respect to Surge within the meaning of the Rules of Professional Conduct of the Chartered Professional Accountants of Alberta.

Certain financial information contained in the AOC Annual Financial Statements have been included in this Information Circular. KPMG LLP is the current auditor of AOC and has confirmed that it is independent of AOC within the meaning of the Rules of Professional Conduct of the Chartered Professional Accountants of Alberta.

INFORMATION CONCERNING AOC

AOC was incorporated pursuant to the provisions of the ABCA on April 1, 2014.

AOC’s head office is located at Suite 1410, 205 – 5th Avenue S.W., Calgary, Alberta T2P 2V7. The registered office of AOC is located at Suite 2400, 525 – 8th Avenue S.W., Calgary, Alberta, T2P 1G1.

See Appendix G – “ Information Concerning AOC ” for detailed information concerning AOC.

INFORMATION CONCERNING SURGE

Surge is a Calgary, Alberta based oil and gas company formed by amalgamation under the ABCA on January 26, 1998. It is engaged in the acquisition of interests in petroleum and natural gas rights, and the exploration, development, production and marketing of petroleum and natural gas reserves primarily in Western Canada. Surge has one subsidiary, 1413942 Alberta Ltd, which is wholly-owned by Surge.

The head office of Surge is located at Suite 2100, 635 – 8th Avenue S.W., Calgary, Alberta, T2P 3M3. The registered office of Surge is located at Suite 4000, 421 – 7th Avenue S.W., Calgary, Alberta, T2P 4K9.

See Appendix H – “ Information Concerning Surge ” and Surge’s AIF under the heading “ Description of the Business ” for detailed information concerning Surge.

INFORMATION CONCERNING SURGE FOLLOWING COMPLETION OF THE ARRANGEMENT

Amendments to Surge Credit Facilities

The Surge Credit Facilities currently includes a $215 million extendible, revolving term facility and a $40 million non-revolving term credit facility. The amount authorized under the revolving term facility is dependent on the borrowing base determined by the lenders. The borrowing base is subject to redetermination by the lenders on a semi-annual basis, generally in May and November of each year or as soon as reasonably practical at the request of Surge. The maturity date of the non-revolving term credit facility is November 17, 2024. Surge is required to comply with covenants under the Surge Credit Facilities which include (among other things) the prohibition on the incurrence by Surge of certain non-permitted indebtedness.

See “ Pro Forma Consolidated Capitalization ” below. See “ Risk Factors ” in the Information Circular.

Pro Forma Consolidated Capitalization

The following table outlines the consolidated capitalization of: (i) AOC as at March 31, 2021 before giving effect to the Arrangement; (ii) Surge as at March 31, 2021 before giving effect to the Arrangement; and (iii) Surge as at March 31, 2021 after giving effect to the Arrangement. This

table should be read in conjunction with the Surge Interim Financial Statements and Surge Interim MD&A, each incorporated by reference in this Information Circular.

Credit Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common Shares(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . Preferred Shares(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . Surge Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . .	Authorized — Unlimited Unlimited $79,000,000	AOC Outstanding as at March 31, 2021 before giving effect to the Arrangement $40,000,000(1) 72,100,837(5) Nil N/A	Surge Outstanding as at March 31, 2021 before giving effect to the Arrangement $255,000,000(2) 339,784,739 Nil $ 79,000,000(10)	Surge Outstanding as at March 31, 2021 after giving effect to the Arrangement Surge Outstanding as at March 31, 2021 after giving effect to the Arrangement and the Surge Share Consolidation $255,000,000(3) $255,000,000(3) 608,485,692(6)(7) 71,586,552(6)(9) Nil Nil $ 79,000,000(10) $ 79,000,000(10)

Notes:

(1) As of March 31, 2021, AOC had $15,553,000 outstanding under the AOC Credit Facility. See Appendix G – “ Information Concerning AOC ”.
(2) As of March 31,2021, Surge had $211.3 million of indebtedness outstanding under the Surge Credit Facilities.
(3) Surge anticipates entering into an amendment to the Surge Credit Facilities concurrently with, and conditional upon, the closing of the Arrangement. See “ Amendment to Surge Credit Facilities ” above. Surge estimates, after giving effect to the Arrangement, approximately $235 million of indebtedness will be outstanding under the Surge Credit Facilities.
(4) Common Shares refers to Surge Shares with respect to Surge and AOC Shares with respect to AOC.
(5) Includes AOC Shares that will be issued pursuant to any “in-the-money” AOC Incentives that will be exercised prior to the consummation of the Arrangement. See “ Effect and Details of the Arrangement – Effect on AOC Incentives ”.
(6) Assuming there are no Dissenting AOC Shareholders and assuming all “in-the-money” AOC Incentives are exercised and all other AOC Incentives are terminated for nominal consideration prior to the consummation of the Arrangement. This number also gives effect to the approximately 39 million Surge Shares issued as “flow-through shares” on May 13, 2021 and the 424,636 Surge Shares issued pursuant to the vesting of previously issued Restricted Share Awards on April 15, 2021. See “ Effect and Details of the Arrangement – Effect on AOC Incentives ” and Appendix H – “ Information Concerning Surge – Prior Sales ”.
(7) Prior to the completion of the Surge Share Consolidation.
(8) Surge currently has an unlimited number of Surge Preferred Shares authorized for issuance. As at March 31, 2021, there are no Surge Preferred Shares issued and outstanding. For a description of the Surge Preferred Shares, see “ Description of Share Capital – Preferred Shares “ in the Surge AIF or Appendix H – “ Information Concerning Surge ” under the heading “ Description of Share Capital ”.
(9) Assuming the completion of the Surge Share Consolidation on the basis of one (1) post-consolidation Surge Share for 8.5 pre-consolidation Surge Shares.
(10) Represents the principal amount of the Surge Debentures without deducting any fair value with respect to the conversion option.

Principal Shareholders of Surge Shares Following the Arrangement

To the best of the knowledge of the directors and executive officers of the Surge, the following Persons or companies are expected to beneficially own, directly or indirectly, or exercise control or direction over, voting securities of Surge carrying more than 10% of the voting rights attached to the Surge Shares following completion of the Arrangement:

Name Annapolis Investment Limited Partnership VI(1) . . . . . . . . . . . . . . . . . . . Annapolis Investment (US) Limited Partnership VI(1) . . . . . . . . . . . . . . . . . . .	Expected Number of Surge Shares Held Following Completion of the Arrangement 47,377,534(2)(3)(4) 31,888,879(2)(3)(4)	Percentage of Expected Total Issued and Outstanding Surge Shares Held Following Completion of the Arrangement
		7.79% 5.24%

Notes:

(1) Annapolis Capital Limited is the manager of each of Annapolis Investment Limited Partnership VI and Annapolis Investment (US) Limited Partnership VI (together “ Annapolis ”). As such, following the completion of the Arrangement, Annapolis Capital Limited shall beneficially own approximately 13.03% of the issued and outstanding shares of Surge. Notwithstanding the foregoing, Annapolis may dispose of certain of its AOC Shares prior to the Effective Date and its ownership would be reduced accordingly.
(2) Annapolis Capital Limited holds 133,900 AOC Options and 93,660 AOC Warrants that will be exercised on a cashless basis resulting in an additional 265,115 Surge Shares being issued.
(3) It is intended that pursuant to a share purchase agreement, Annapolis will acquire a minimum of an additional 5,000,000 AOC Shares (up to 10,000,000 AOC Shares) from Camcor Partners Fund VII (as defined herein) prior to the completion of the Arrangement, resulting in Annapolis holding a minimum of an additional 15,873,000 Surge Shares (up to 31,746,000 Surge Shares) following the completion of the Arrangement. As a result, Annapolis will collectively hold an aggregate of a minimum of 95,404,528 Surge Shares (up to 111,277,528 Surge Shares) or a minimum of 15.7% (up to 18.3%) of the issued and outstanding Surge Shares (assuming the cashless exercise of all AOC Options and AOC Warrants, including those held by Annapolis Capital Limited).

(4) Prior to the completion of the Surge Share Consolidation.

Auditors, Registrar and Transfer Agent

Following completion of the Arrangement, Surge’s auditor will continue to be KPMG LLP and its registrar and transfer agent will continue to be Odyssey Trust Company at its principal offices in Calgary, Alberta and Toronto, Ontario.

GENERAL PROXY MATTERS – AOC

Solicitation of Proxies

This Information Circular is furnished in connection with the solicitation of proxies by management of AOC to be used at the AOC Meeting. Solicitations of proxies will be primarily by mail, but may also be supplemented by telephone, newspaper publication or other contact.

All costs of the solicitation for the AOC Meeting will be borne by AOC.

The information set forth below generally applies to Registered Holders of AOC Shares. If you are a Beneficial Shareholder of AOC Shares (i.e., your AOC Shares are held through an Intermediary), please see “ General Information – Information for Beneficial Shareholders ” at the front of this Information Circular.

Appointment and Revocation of Proxies

Accompanying this Information Circular is a form of proxy for AOC Shareholders. The persons named in the enclosed form of proxy are directors and/or officers of AOC. An AOC Shareholder has the right to appoint a person (who need not be an AOC Shareholder) to represent such AOC Shareholder at the AOC Meeting other than the persons designated in the accompanying form of proxy either by inserting such person’s name in the blank space provided in the form of proxy or by completing another form of proxy.

A form of proxy will only be valid if it is duly completed, signed and then delivered to the offices of Computershare Trust Company of Canada, Proxy Dept., 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, by telephone at 1-866-732-VOTE (8683), by facsimile at 1-866-249-7775 or through the internet by using the 15-digit control number located at the bottom of your proxy at www.investorvote.com. The form of proxy must be received at the aforesaid address not later than 8:30 a.m. (Calgary time) on August 13, 2021 or not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the time of any adjournment or postponement of the AOC Meeting. For information regarding the voting or appointing a proxy by internet, see the form of proxy for AOC Shareholders and the Information Circular under the heading “ General Proxy Matters – AOC – Voting by Internet ”. Failure to so deposit a form of proxy will result in its invalidation. Notwithstanding the foregoing, the chair of the AOC Meeting has the discretion to accept proxies received after such deadline.

For registered AOC Shareholders who do not receive physical delivery of the form of proxy by mail due to a postal disruption as a result of a Canada Post labour disruption or any other cause, the form of proxy for use by registered AOC Shareholders is also available on Surge’s corporate website at www.surgeenergy.ca . In the event of a postal disruption, registered AOC Shareholders are encouraged to complete the form of proxy and return it by courier to Computershare Trust Company of Canada, Proxy Dept., 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, by telephone at 1-866-732-VOTE (8683), by facsimile at 1-866-249-7775 or through the internet by using the 15-digit control number located at the bottom of your proxy at www.investorvote.com, not less than 48 hours (excluding Saturdays, Sundays and statutory holidays in Alberta) before the time set for the AOC Meeting.

An AOC Shareholder who has given a form of proxy may revoke it as to any matter on which a vote has not already been cast pursuant to its authority by an instrument in writing executed by such AOC Shareholder or by its attorney duly authorized in writing or, if the AOC Shareholder is a corporation, by an officer or attorney thereof duly authorized, and deposited at the registered office of AOC at any time up to and including the last Business Day preceding the day of the AOC Meeting, or any adjournment or postponement of the AOC Meeting, at which the proxy is to be used, or with the chair of the AOC Meeting on the day of the AOC Meeting or any adjournment or postponement thereof, or in any other manner permitted by law.

Record Date

The AOC Record Date for determination of AOC Shareholders entitled to receive notice of and to vote at the AOC Meeting is July 13, 2021. Only AOC Shareholders whose names have been entered in the register of AOC Shareholders on the close of business on the AOC Record Date will be entitled to receive notice of and to vote at the AOC Meeting. To the extent an AOC Shareholder transfers the ownership of any of its AOC Shares after the AOC Record Date and the transferee of those AOC Shares establishes that it owns such AOC Shares and requests, at least 10 days before the AOC Meeting, to be included in the list of AOC Shareholders eligible to vote at the AOC Meeting, such transferee will be entitled to vote those AOC Shares at the AOC Meeting.

Signature of Proxy

The form of proxy accompanying this Information Circular must be executed by the AOC Shareholder or its attorney authorized in writing, or if the AOC Shareholder is a corporation, the form of proxy should be signed in its corporate name under its corporate seal by an authorized officer whose title should be indicated. A proxy signed by a Person acting as attorney or in some other representative capacity should reflect such Person’s capacity following its signature and should be accompanied by the appropriate instrument evidencing qualification and authority to act (unless such instrument has been previously filed with AOC).

Voting of Proxies

The AOC Shares represented by the form of proxy will be voted or withheld from voting in accordance with the instructions of the AOC Shareholder on any ballot that may be called for, and if the AOC Shareholder specifies a choice with respect to any matter to be acted upon at the AOC Meeting, then the AOC Shares will be voted accordingly. In the absence of such instructions, the AOC Shares will be voted FOR the approval of the AOC Arrangement Resolution as described in this Information Circular.

Exercise of Discretion of Proxy

The proxyholder has discretion under the accompanying form of proxy to consider matters to come before the AOC Meeting. At the date of this Information Circular, management of AOC knows of no amendments, variations or other matters to come before the AOC Meeting other than the matters referred to in the Notice of Meeting. AOC Shareholders who are planning on returning the accompanying form of proxy are encouraged to review the Information Circular carefully before submitting the proxy form.

Voting Shares and Principal Holders Thereof

AOC’s issued and outstanding voting securities as at July 16, 2021 consist of 68,006,231 AOC Shares. AOC Shareholders are entitled to one vote for each AOC Share held on all matters to be considered and acted upon at the AOC Meeting or any adjournment or postponement thereof.

AOC has set the close of business on July 16, 2021 as the record date for the AOC Meeting. AOC will prepare a list of AOC Shareholders of record at such time. AOC Shareholders named on that list will be entitled to vote the AOC Shares then registered in their name at the AOC Meeting, except to the extent that (a) the holder has transferred the ownership of any of the holder’s AOC Shares after that date, and (b) the transferee of those shares produces properly endorsed certificates representing AOC Shares, or otherwise establishes that such transferee owns the AOC Shares, and demands at any time prior to ten days before the AOC Meeting that the transferee’s name be included in the list of Persons entitled to vote at the AOC Meeting, in which case the transferee will be entitled to vote such AOC Shares at the AOC Meeting or any adjournment or postponement thereof.

To the best of the knowledge of the directors and executive officers of the AOC, as at July 16, 2021, the following Persons or companies beneficially owned, directly or indirectly, or exercised control or direction over, voting securities of the AOC carrying more than 10% of the voting rights attached to the shares of AOC:

Name Camcor Partners Fund VII GP Inc.(1)(2) . . . . . . . . . . . . . . . . . . . . . Annapolis Investment Limited Partnership VI(3) . . . . . . . . . . . . . . . . . Annapolis Investment (US) Limited Partnership VI(3) . . . . . . . . . . . . . . . . .	Number of AOC Shares held as of July16, 2021 20,000,000 14,923,938 10,045,007	Percentage of total issued and outstanding AOC Shares held as of July16, 2021
		29.41% 21.95% 14.77%

Notes:

(1) Camcor Partners Fund VII GP Inc. (“ Camcor GP ”) is the general partner of Camcor Energy Fund VII-A LP (“ Camcor VII-A ”), Camcor Energy Fund VII-A2 LP (“ Camcor VII-A2 ”) and Camcor Energy Fund VII-B LP (“ Camcor VII-B ”), each a limited partnership subsisting under the laws of the Province of Alberta (collectively “ Camcor Energy Fund VII ”). Of the 20,000,000 AOC Shares registered in the name of Camcor GP, Camcor VII-A is the beneficial holder of 4,611,428 AOC Shares, Camcor VII-A2 is the beneficial holder of 5,714,286 AOC Shares and Camcor VII-B is the beneficial holder of 9,674,286 AOC Shares. Camcor Energy Fund VII has entered into an agreement to collectively dispose of 10,000,000 AOC Shares prior to the Effective Time.
(2) Ian Fergusson and Cameron McVeigh, directors of AOC, are both Managing Directors of Camcor GP.

(3) Jody Forsyth, a director of AOC, is a Managing Partner of Annapolis, the manager of Annapolis Investment Limited Partnership VI and Annapolis Investment (US) Limited Partnership VI.

Voting by Internet

AOC Shareholders may use the internet at https://www.investorvote.com to transmit their voting instructions. AOC Shareholders should have the form of proxy in hand when they access the website noted above. AOC Shareholders will be prompted to enter their Control Number, Holder Account Number and Access Number which are located on the form of proxy. If AOC Shareholders vote by internet, their vote must be received not later than 8:30 a.m. (Calgary time) on August 13, 2021 or not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the time of any adjournment or postponement of the AOC Meeting. The website may be used to appoint a proxyholder to attend and vote on an AOC Shareholder’s behalf at the AOC Meeting and to convey an AOC Shareholder’s voting instructions. Please note that if an AOC Shareholder appoints a proxyholder and submits its voting instructions and subsequently wishes to change its appointment, an AOC Shareholder may resubmit its proxy, prior to the deadline noted above. When resubmitting a proxy, the most recently submitted proxy will be recognized as the only valid one, and all previous proxies submitted will be disregarded and considered as revoked, provided that the last proxy is submitted by the deadline noted above.

GENERAL PROXY MATTERS – SURGE

Solicitation of Proxies

This Information Circular is furnished in connection with the solicitation of proxies by management of Surge to be used at the Surge Meeting. Solicitations of proxies will be primarily by mail, but may also be supplemented by telephone, newspaper publication or other contact.

All costs of the solicitation for the Surge Meeting will be borne by Surge. Surge has retained Shorecrest Group (“ Shorecrest ”) to assist it in connection with Surge’s communications with Surge Shareholders. In connection with these services, Shorecrest is expected to receive a fee, plus out-of-pocket expenses. In addition, Surge may, upon request, pay to certain brokerage firms, fiduciaries or other persons holding Surge Shares in their names for others, the charges entailed in sending out the Meeting Materials to the persons for whom they hold Surge Shares. Surge may utilize the Broadridge QuickVote[™] service to assist non-objecting beneficial owners (“ NOBOs ”) with voting their Surge Shares. NOBOs may be contacted by Shorecrest to conveniently obtain a vote directly over the telephone.

The information set forth below generally applies to Registered Holders of Surge Shares. If you are a Beneficial Shareholder of Surge Shares (i.e., your Surge Shares are held through an Intermediary), please see “ General Information – Information for Beneficial Shareholders ” at the front of this Information Circular.

Attending and Voting at the Meeting

Registered Surge Shareholders (who have not appointed a proxyholder) and duly appointed proxyholders (including non-registered Surge Shareholders who appoint themselves as proxyholders) will be able to virtually attend the Surge Meeting, vote and ask questions, all in realtime, provided they are connected to the internet. Non-registered Surge Shareholders who have not properly appointed themselves as proxyholder will be able to attend the Surge Meeting as guests, but will not be able to vote or ask questions at the Surge Meeting. Non-registered Surge Shareholders who wish to vote and ask questions at the Surge Meeting must appoint themselves as proxyholder and register with our transfer agent Odyssey Trust Company as described under “ Appointment and Revocation of Proxies ”, below.

Step 1: Log in online at: https://web.lumiagm.com/275-179-871. We recommend that Surge Shareholders log in to the webcast as early as possible but not later than 15 minutes before the time of the Surge Meeting to confirm that the browser for whichever device they are using is compatible.

Step 2: Follow these instructions:

Registered Shareholders :

Click “I have a login”
Enter the control number (the 12-digit control number provided on the form of proxy)
Enter the password: surge2021 (case sensitive)

Duly appointed proxyholders:

“Click “I have a login”
Enter the control number (the 12-digit control number provided by Odyssey by email after the proxy voting deadline has passed and after following the steps under “ Appointment and Revocation of Proxies ”, below)
Enter the password: surge2021 (case sensitive)

Guests

Click “I am a Guest”
Complete the online form

If you are a registered Surge Shareholder and wish to vote at the Surge Meeting, you do not need to complete or return your form of proxy. Registered Surge Shareholders and their duly appointed proxyholders may vote at the Surge Meeting by completing a ballot online during the Surge Meeting. If you use your control number to log into the Surge Meeting, any vote you cast at the Surge Meeting will revoke any proxy you previously submitted. If you do not wish to revoke a previously submitted proxy, you should not vote during the Surge Meeting.

If you attend the Surge Meeting online, it is important that you are connected to the internet at all times during the Surge Meeting in order to vote when balloting commences. It is your responsibility to ensure connectivity for the duration of the Surge Meeting. You should allow ample time to check into the Surge Meeting online and complete the related procedure.

Appointment and Revocation of Proxies

Accompanying this Information Circular is a form of proxy for holders of Surge Shares. The Persons named in the enclosed form of proxy are directors and/or officers of Surge. A Surge Shareholder submitting a proxy has the right to appoint a person or company to represent him or her at the Surge Meeting other than the persons designated in the form of proxy furnished by Surge. To exercise this right, the Surge Shareholder should insert the name of the desired representative in the blank space provided in the form of proxy and strike out the other names or submit another appropriate proxy. You must also provide Odyssey with the required information for your appointee so that Odyssey may provide your appointee with a control number. This control number will allow your appointee to log in to and vote at the Surge Meeting. Without a control number, your proxyholder will only be able to log into the Surge Meeting as a guest and will not be able to vote or ask questions.

To register a proxyholder, Surge Shareholders MUST send an email to [email protected] no later than 9:30 a.m. Calgary time on August 13, 2021 or if the Surge Meeting is adjourned or postponed at least 48 hours prior to the time of the adjourned or postposed Surge Meeting and provide Odyssey Trust Company with their proxyholder’s contact information including their email, amount of shares appointed, name in which the shares are registered if they are a registered holder, or the name of broker where shares are held if a non-registered shareholder, so that Odyssey Trust Company may provide the proxyholder with a Username and control number after the proxy deadline has passed.

In order to be effective, the proxy must be mailed so as to be deposited at the office of Surge’s transfer agent, Odyssey Trust Company, 1230-300 5th Avenue S.W., Calgary, Alberta T2P 3C4, before 9:30 a.m. (Calgary time) on August 13, 2021 or, if the Surge Meeting is adjourned or postponed, at least 48 hours prior to the time of the adjourned or postponed Surge Meeting. Late proxies may be accepted or rejected by the Chair of the Surge Meeting in his or her discretion, and the Chair is under no obligation to accept or reject any particular late proxy. The instrument appointing a proxy shall be in writing under the hand of the Surge Shareholder or his or her attorney, or, if such Surge Shareholder is a corporation, under its corporate seal, and executed by a director, officer or attorney thereof duly authorized.

A registered Surge Shareholder who has submitted a proxy may revoke it prior to its use by instrument in writing executed by the Surge Shareholder or his or her attorney authorized in writing, or, if the Surge Shareholder is a corporation, under its corporate seal and executed by a director, officer or attorney thereof duly authorized, and deposited either at the office of Surge’s transfer agent, Odyssey Trust Company, 1230-300 5th Avenue S.W., Calgary, Alberta T2P 3C4 on the last business day preceding the day of the Surge Meeting or with the Chair of the Surge Meeting on the day of the Surge Meeting, but prior to the commencement thereof, and upon such deposit the previous proxy is revoked. If you use your control number to log into the Surge Meeting, any vote you cast at the Surge Meeting will revoke any proxy you previously submitted. If you do not wish to revoke a previously submitted proxy, you should not vote during the Surge Meeting.

Registered Surge Shareholders may also use vote by internet at https://login.odysseytrust.com/pxlogin to vote their Surge Shares at the Surge Meeting. The website may also be used to appoint a proxy holder to attend and vote at the Surge Meeting on the registered Surge Shareholder’s behalf and convey voting instructions. Non-registered Surge Shareholders (holders that shares are held on their behalf by a bank, broker or other financial intermediaries) should follow the instructions provided by their financial intermediary.

For information regarding the voting or appointing a proxy by internet, see the form of proxy for Surge Shareholders and the Information Circular under the heading “ General Proxy Matters – Surge – Voting by Internet ”. Failure to so deposit a form of proxy will result in its invalidation. Notwithstanding the foregoing, the chair of the Surge Meeting has the discretion to accept proxies received after such deadline.

For registered Surge Shareholders who do not receive physical delivery of the form of proxy by mail due to a postal disruption as a result of a Canada Post labour disruption or any other cause the form of proxy for use by registered Surge Shareholders is also available under Surge’s profile at www.sedar.com and on Surge’s corporate website at www.surgeenergy.ca. In the event of a postal disruption, registered Surge Shareholders are encouraged to vote via the internet, telephone, or complete the form of proxy and return it by courier to Odyssey Trust Company, 1230-300 5th Avenue S.W., Calgary, Alberta T2P 3C4, or by email to [email protected] not less than 48 hours (excluding Saturdays, Sundays and statutory holidays in Alberta) before the time set for the Surge Meeting.

A Surge Shareholder who has given a form of proxy may revoke it as to any matter on which a vote has not already been cast pursuant to its authority by an instrument in writing executed by such Surge Shareholder or by its attorney duly authorized in writing or, if the Surge Shareholder is a corporation, by an officer or attorney thereof duly authorized, and deposited at the registered office of Surge at any time up to and including the last Business Day preceding the day of the Surge Meeting, or any adjournment or postponement of the Surge Meeting, at which the proxy is to be used, or with the chair of the Surge Meeting on the day of the Surge Meeting or any adjournment or postponement thereof, or in any other manner permitted by law.

Record Date

The Surge Record Date for determination of Surge Shareholders entitled to receive notice of and to vote at the Surge Meeting is July 15, 2021. Only Surge Shareholders whose names have been entered in the register of Surge Shareholders on the close of business on the Surge Record Date will be entitled to receive notice of and to vote at the Surge Meeting. To the extent a Surge Shareholder transfers the ownership of any of its Surge Shares after the Surge Record Date and the transferee of those Surge Shares establishes that it owns such Surge Shares and requests, at least 10 days before the Surge Meeting, to be included in the list of Surge Shareholders eligible to vote at the Surge Meeting, such transferee will be entitled to vote those Surge Shares at the Surge Meeting.

Signature of Proxy

The form of proxy accompanying this Information Circular must be executed by the Surge Shareholder or its attorney authorized in writing, or if the Surge Shareholder is a corporation, the form of proxy should be signed in its corporate name under its corporate seal by an authorized officer whose title should be indicated. A proxy signed by a Person acting as attorney or in some other representative capacity should reflect such Person’s capacity following its signature and should be accompanied by the appropriate instrument evidencing qualification and authority to act (unless such instrument has been previously filed with Surge).

Voting of Proxies

The Surge Shares represented by the form of proxy will be voted or withheld from voting in accordance with the instructions of the Surge Shareholder on any ballot that may be called for, and if the Surge Shareholder specifies a choice with respect to any matter to be acted upon at the Surge Meeting, then the Surge Shares will be voted accordingly. In the absence of such instructions, the Surge Shares will be voted FOR the approval of the Surge Issuance Resolution and, if applicable, FOR the approval of the Surge Share Consolidation Resolution as described in this Information Circular.

Exercise of Discretion of Proxy

The proxyholder has discretion under the accompanying form of proxy to consider matters to come before the Surge Meeting. At the date of this Information Circular, management of Surge knows of no amendments, variations or other matters to come before the Surge Meeting other than the matters referred to in the Notice of Meeting. Surge Shareholders who are planning on returning the accompanying form of proxy are encouraged to review the Information Circular carefully before submitting the proxy form.

Voting Shares and Principal Holders Thereof

Surge’s issued and outstanding voting securities as at July 15, 2021 consist of 379,594,375 Surge Shares and no Surge Preferred Shares. Surge Shareholders are entitled to one vote for each Surge Share held on all matters to be considered and acted upon at the Surge Meeting or any adjournment or postponement thereof.

To the knowledge of the directors and executive officers of Surge, no Person, firm or company beneficially owns or controls or directs, directly or indirectly, voting securities carrying 10% or more of the voting rights attached to the Surge Shares:

Voting by Internet

Surge Shareholders may use the internet at https://login.odysseytrust.com/pxlogin to transmit their voting instructions. Surge Shareholders should have the form of proxy in hand when they access the website noted above. Surge Shareholders will be prompted to enter their Control Number, Holder Account Number and Access Number which are located on the form of proxy. If Surge Shareholders vote by internet, their vote must be received not later than 9:30 a.m. (Calgary time) on August 13, 2021 or not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the time of any adjournment or postponement of the Surge Meeting. The website may be used to appoint a proxyholder to attend and vote on a Surge Shareholder’s behalf at the Surge Meeting and to convey a Surge Shareholder’s voting instructions. Please note that if a Surge Shareholder appoints a proxyholder and submits its voting instructions and subsequently wishes to change its appointment, a Surge Shareholder may resubmit its proxy, prior to the deadline noted above. When resubmitting a proxy, the most recently submitted proxy will be recognized as the only valid one, and all previous proxies submitted will be disregarded and considered as revoked, provided that the last proxy is submitted by the deadline noted above.

APPENDIX A

AOC ARRANGEMENT RESOLUTION

BE IT RESOLVED AS A SPECIAL RESOLUTION OF THE HOLDERS OF COMMON SHARES OF ASTRA OIL CORP. (“ AOC ”) THAT:
the arrangement under Section 193 of the Business Corporations Act (Alberta) involving, among others, AOC, the holders of the common shares of AOC and Surge Energy Inc. (the “ Arrangement ”), substantially as set forth in the plan of arrangement (the “ Plan of Arrangement ”) attached as Exhibit “A” to Appendix D to the joint information circular of AOC and Surge dated July 16, 2021 accompanying the notices of meeting for each of AOC and Surge, and all transactions contemplated thereby are hereby authorized, approved, ratified and confirmed;
notwithstanding that this resolution has been duly passed and/or has received the approval of the Court of Queen’s Bench of Alberta, the board of directors of AOC may, without further notice to or approval of the securityholders of AOC, subject to the terms of the Arrangement, (i) amend or terminate the arrangement agreement dated June 22, 2021 between Surge and AOC or the Plan of Arrangement, or (ii) revoke this resolution at any time prior to the filing of articles of arrangement giving effect to the Arrangement;
any director or officer of AOC is hereby authorized, for and on behalf of AOC, to execute and deliver articles of arrangement and to execute, with or without the corporate seal, and, if appropriate, deliver all other documents and instruments and to do all other things as in the opinion of such director or officer may be necessary or desirable to implement this resolution and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of any such document or instrument, and the taking of any such action; and
all actions heretofore taken by or on behalf of AOC in connection with any matter referred to in any of the foregoing resolutions which were in furtherance of the Arrangement are hereby approved, ratified and confirmed in all respects.

APPENDIX B-1

SURGE ISSUANCE RESOLUTION

BE IT RESOLVED AS AN ORDINARY RESOLUTION OF THE HOLDERS OF COMMON SHARES OF SURGE ENERGY INC. (“ SURGE ”) THAT:

the issuance of up to 229,000,000 common shares (“ Surge Shares ”) in the capital of Surge in exchange for common shares in the capital of Astra Oil Corp. (“ AOC ”) (including approximately 108,683 additional Surge Shares that may be required to be issued to account for clerical and administrative matters, including the rounding for fractional shares), pursuant to the arrangement under Section 193 of the Business Corporations Act (Alberta) involving, among others, AOC and the shareholders of AOC and Surge (the “ Arrangement ”), substantially as set forth in the plan of arrangement (the “ Plan of Arrangement ”) attached as Exhibit “A” to Appendix D to the joint information circular of AOC and Surge dated July 16, 2021 accompanying the notice of meeting for each of AOC and Surge is hereby authorized and confirmed;
notwithstanding that this resolution has been duly passed, the board of directors of Surge may, without further notice to or approval of the securityholders of Surge, subject to the terms of the Arrangement, (i) amend or terminate the arrangement agreement dated June 22, 2021 between Surge and AOC or the Plan of Arrangement, or (ii) revoke this resolution at any time prior to the filing of articles of arrangement giving effect to the Arrangement
any director or officer of Surge is hereby authorized, for and on behalf of Surge, to execute and deliver articles of arrangement and to execute, with or without the corporate seal, and, if appropriate, deliver all other documents and instruments and to do all other things as in the opinion of such director or officer may be necessary or desirable to implement this resolution and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of any such document or instrument, and the taking of any such action; and
all actions heretofore taken by or on behalf of Surge in connection with any matter referred to in any of the foregoing resolutions which were in furtherance of the Arrangement are hereby approved, ratified and confirmed in all respects.

B-1-1

APPENDIX B-2

SURGE SHARE CONSOLIDATION RESOLUTION

BE IT RESOLVED AS A SPECIAL RESOLUTION OF THE HOLDERS OF COMMON SHARES OF SURGE ENERGY INC. (“ SURGE ”) THAT:

subject to a plan of arrangement under Section 193 of the Business Corporations Act (Alberta) (the “ ABCA ”) involving Surge, Astra Oil Corp.(“ AOC ”) and holders of common shares of AOC becoming effective, the articles of amalgamation of Surge be amended to change the number of issued and outstanding common shares (“ Surge Shares ”) of Surge by consolidating such issued and outstanding Surge Shares on the basis of one (1) post-consolidation Surge Share for each 8.5 existing Surge Shares (the “ Consolidation ”);
no fractional Surge Shares shall be issued in connection with the Consolidation and in the event that a holder of Surge Shares (“ Surge Shareholder ”) would otherwise be entitled to receive a fractional Surge Share, such fractional interest shall be rounded down to the nearest whole Surge Share;
notwithstanding that this resolution has been passed by the Surge Shareholders, the board of directors of Surge is hereby authorized and empowered, without further approval of the Surge Shareholders, to not proceed with the Consolidation or otherwise give effect to these resolutions; and
any director or officer of Surge be and is hereby authorized and directed, for and on behalf of Surge, to execute (whether under the corporate seal of Surge or otherwise) and deliver, or cause to be executed and delivered articles of amendment to the Registrar of Corporations under the ABCA in order to give effect to the foregoing special resolution, and to execute (whether under the corporate seal of Surge or otherwise) and deliver, or cause to be executed and delivered, and to sign and/or file, or cause to be signed and/or filed, as the case may be all applications, declarations, instruments and other documents, and to do or cause to be done all such other acts and things, as such director or officer may determine necessary or advisable to give effect to the foregoing special resolution including, without limitation, the execution, signing or filing of any such document or the doing of any such act or thing being conclusive evidence of such determination.

B-2-1

APPENDIX C

NOTICE OF APPLICATION

IN THE COURT OF QUEEN’S BENCH OF ALBERTA

JUDICIAL DISTRICT OF CALGARY

IN THE MATTER OF SECTION 193 OF THE BUSINESS CORPORATIONS ACT, R.S.A. 2000, C. B 9, AS AMENDED;

AND IN THE MATTER OF A PROPOSED ARRANGEMENT INVOLVING, INTER ALIA, ASTRA OIL CORP., SURGE ENERGY INC. AND THE SHAREHOLDERS OF ASTRA OIL CORP.

NOTICE IS HEREBY GIVEN that an originating application (“ Application ”) has been filed by Astra Oil Corp. (“ AOC ” or the “ Applicant ”) for an order approving a proposed plan of arrangement (the “ Arrangement ”) involving, inter alia, AOC, Surge Energy Inc. (“ Surge ”) and the holders (“ AOC Shareholders ”) of common shares in the capital of AOC pursuant to Section 193 of the Business Corporations Act , R.S.A. 2000, c. B 9 (the “ ABCA ”), which Arrangement is described in greater detail in the joint management information circular of AOC and Surge dated July 16, 2021 accompanying this Notice of Application. At the hearing on the Application, the Applicant intends to seek:

(a) a declaration that the Arrangement is brought in good faith and that the terms and conditions of the Arrangement and the procedures relating thereto are fair to the persons affected, both from a substantive and procedural prospective;
(b) a declaration that the Arrangement will, upon the filing of Articles of Arrangement pursuant to Section 193 of the ABCA and the issuance of the Proof of Filing of Articles of Arrangement under the ABCA, become effective in accordance with its terms and will be binding on each of the parties affected;
(c) an order approving the Arrangement pursuant to the provisions of Section 193 of the ABCA; and
(d) such other and further orders, declarations and directions as the Court (as defined herein) may deem just.

AND NOTICE IS FURTHER GIVEN that the Application is directed to be heard at the Court House, 601 – 5[th] Street, Calgary, Alberta on the 17[th] day of August, 2021 at 2:00 p.m. (Calgary time), or so soon thereafter as counsel may be heard. Any AOC Shareholder or any other interested party desiring to support or oppose the Application may appear at the time of the hearing in person or by counsel for that purpose. Any AOC Shareholder or any other interested party desiring to appear at the hearing is required to file with the Court of Queen’s Bench of Alberta, Judicial District of Calgary (the “Court”), and serve upon the Applicant, on or before 4:00 p.m. (Calgary time) on August 13, 2021 (or the Business Day that is two Business Days prior to the date of the special meeting of the AOC Shareholders called for the purpose of approving the Arrangement (the “AOC Meeting”) if the AOC Meeting is not held on August 17, 2021), a notice of its intention to appear, including an address for service in Calgary, Alberta, together with any evidence or materials which are to be presented to the Court . Service on the Applicant is to be effected by delivery to the solicitors for AOC, c/o Burnet, Duckworth & Palmer LLP, Suite 2400, 525 – 8th Avenue S.W., Calgary, Alberta T2P 1G1, Attention: Ryan Algar.

AND NOTICE IS FURTHER GIVEN that, at the hearing, AOC Shareholders and other interested parties will be entitled to make representations as to, and the Court will be requested to consider, the fairness and reasonableness of the Arrangement. If you do not attend, either in person or by counsel, at that time, the Court may approve the Arrangement as presented, or may approve the Arrangement subject to such terms and conditions as the Court shall deem fit, without any further notice.

AND NOTICE IS FURTHER GIVEN that no further notice of the Application will be given by the Applicants and that, in the event the hearing of the Application is adjourned, only those persons who have appeared before the Court at the hearing shall be served notice of the adjourned date.

AND NOTICE IS FURTHER GIVEN that the Court, by an order dated July 15, 2021, has given directions as to the calling of the AOC Meeting to have such AOC Shareholders vote upon a resolution to approve the Arrangement and, in particular, has directed that the AOC Shareholders shall have the right to dissent under Section 191 of the ABCA as modified by the terms of the interim order.

AND NOTICE IS FURTHER GIVEN that the Final Order approving the Arrangement will, if granted, serve as the basis for an exemption from the registration requirements of the United States Securities Act of 1933, as amended (the “ U.S. Securities Act ”), pursuant to Section 3(a)(10) thereof, with respect to the issuance of the common shares of Surge (“ Surge Shares ”) issuable to AOC Shareholders in exchange for their AOC Shares (and the deemed issuance under the U.S. Securities Act of post-amalgamation Surge Shares issuable to holders of pre-amalgamation Surge Shares) pursuant to the Arrangement.

AND NOTICE IS FURTHER GIVEN that a copy of the said Application and other documents in the proceedings will be furnished to any AOC Shareholder or other interested party requesting the same from the solicitors for the Applicant at the address given above.

DATED at Calgary, Alberta, this 16[th] day of July, 2021.

BY ORDER OF THE BOARD OF DIRECTORS OF ASTRA OIL CORP.

(signed) “ Andrew Greenslade ”

Andrew Greenslade President and Chief Executive Officer Astra Oil Corp

APPENDIX D

ARRANGEMENT AGREEMENT

D-1

ARRANGEMENT AGREEMENT

BETWEEN

SURGE ENERGY INC.

- AND -

ASTRA OIL CORP.

June 22, 2021

Article	1 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
	1.1	Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
	1.2	Interpretation Not Affected by Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
	1.3	Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
	1.4	Date for Any Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
	1.5	Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
	1.6	Statute and Agreement References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
	1.7	Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	1.8	Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	1.9	Interpretation Not Affected by Party Drafting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	1.10	Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	1.11	Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	1.12	Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Article	2 THE	ARRANGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	2.1	Plan of Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	2.2	Interim Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
	2.3	Information Circular and Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
	2.4	Preparation of Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
	2.5	Treatment of AOC Options and AOC Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
	2.6	AOC Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
	2.7	Articles of Arrangement and Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
	2.8	Directors’ and Officers’ Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
	2.9	Recommendation of AOC Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
	2.10	Recommendation of Surge Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
	2.11	Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
	2.12	Tax Withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Article	3 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		13
	3.1	Covenants of AOC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
	3.2	Covenants of Surge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
	3.3	Mutual Covenants Regarding the Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
	3.4	Covenants Regarding Non-Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
	3.5	Provision of Information; Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Article	4 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		21
	4.1	Representations and Warranties of AOC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
	4.2	Representations and Warranties of Surge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	30
	4.3	Privacy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
Article	5 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		36
	5.1	Mutual Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36
	5.2	Additional Conditions to Obligations of AOC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	37
	5.3	Additional Conditions to Obligations of Surge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38
	5.4	Notice and Effect of Failure to Comply with Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	39
	5.5	Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	39
Article	6 AGREEMENT AS TO DAMAGES AND OTHER ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		39
	6.1	AOC Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	39
	6.2	Surge Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	39
	6.3	Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	40
Article	7 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		40
	7.1	Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	40
	7.2	Amendment of Plan of Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	40
Article	8 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		41
	8.1	Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41
Article	9 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		41
	9.1	Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41
Article	10 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		42
	10.1	Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
	10.2	Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
	10.3	Public Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
	10.4	Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
	10.5	Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
	10.6	Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42

10.7 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
10.8 Applicable Law and Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
10.9 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	43
10.10 Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	43
10.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	44
Exhibit “A” PLAN OF ARRANGEMENT UNDER SECTION 193 ENSYRE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Exhibit “B” AOC ARRANGEMENT RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Exhibit “C” SURGE ISSUANCE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1

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ARRANGEMENT AGREEMENT

THIS ARRANGEMENT AGREEMENT is dated as of the 22[nd] day of June, 2021.

BETWEEN:

SURGE ENERGY INC. , a corporation incorporated under the laws of the Province of Alberta (“ Surge ”)

-and-

ASTRA OIL CORP. , a corporation incorporated under the laws of the Province of Alberta (“ AOC ”)

WHEREAS:

A. Surge wishes to acquire all of the issued and outstanding AOC Shares;
B. the Parties intend to carry out the acquisition of the AOC Shares contemplated herein by way of an arrangement under section 193 of the ABCA substantially on the terms and conditions set forth in the Plan of Arrangement (annexed hereto as Schedule “A”);
C. the AOC Board has unanimously: (i) determined that the Arrangement is in the best interests of AOC; (ii) determined that the Arrangement is fair to the AOC Shareholders; (ii) approved the Arrangement, this Agreement and the transactions contemplated hereby; and (iv) resolved to recommend that the AOC Shareholders vote in favour of the Arrangement;
D. as an inducement to Surge to enter into this Agreement, each AOC Supporting Shareholder has agreed to vote in favour of the Arrangement at the AOC Meeting and to certain restrictions on the disposition of Surge Shares received by such AOC Shareholder pursuant to the Arrangement; and
E. the Parties have entered into this Agreement to provide for the matters referred to in the foregoing recitals and for other matters relating to such transaction.

NOW THEREFORE , in consideration of the covenants and agreements herein contained and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Parties covenant and agree as follows:

ARTICLE 1 INTERPRETATION

1.1 Definitions

In this Agreement, the following defined terms have the meanings hereinafter set forth:

(a) “ ABCA ” means the Business Corporations Act , R.S.A. 2000, c. B-9, as amended, including the regulations promulgated thereunder;
(b) “ Acquisitionco ” means the wholly-owned subsidiary of Surge to be incorporated by Surge prior to the Effective Date for the purposes of participating in the Plan of Arrangement;
(c) “ Acquisition Proposal ” means, other than the transactions contemplated by this Agreement, any inquiry or the making of any offer or proposal, whether or not in writing or subject to a due diligence or other condition, to AOC, or AOC Shareholders or any other securityholder of AOC (including any take-over bid initiated by advertisement or circular) from any Person or Persons acting “ jointly or in concert ” (where such phrase has the meaning ascribed thereto in Applicable Securities Laws) prior to the termination of this Agreement or consummation of the Arrangement, as applicable, which constitutes, or may reasonably be expected to lead to (in either case whether in one transaction or a series of transactions):
(i) any direct or indirect, sale, issuance or acquisition of voting securities of AOC that, when taken together with any securities of AOC held by the proposed acquiror, and any Person acting jointly or in concert with such acquiror, and assuming the conversion of any securities convertible into voting securities held by the proposed acquiror, and any Person acting jointly or in concert with such acquiror, would constitute beneficial ownership of 20% or more of the outstanding voting securities of AOC or rights or interests therein;
(ii) any direct or indirect acquisition or purchase (or any lease, long-term supply agreement or other arrangement having the same economic effect as an acquisition or purchase), of assets of AOC that constitute 20% or more of the assets of AOC (on a consolidated basis measured by the fair market value thereof as of the date of any such inquiry, offer or proposal);
(iii) an amalgamation, arrangement, merger, business combination, consolidation, share exchange or other similar transaction involving AOC;
(iv) a take-over bid, issuer bid, tender offer, exchange offer, recapitalization, liquidation, dissolution, reorganization or other similar transaction involving AOC; or
(v) any other transaction, the consummation of which would or could reasonably be expected to impede, interfere with, prevent or delay the transactions contemplated by this Agreement or the Arrangement or which would or could reasonably be expected to materially reduce the benefits to the Parties under this Agreement or the Arrangement,

except that for the purpose of the definition of “Superior Proposal” in Section 1.1(pppp), the references in the definition of “Acquisition Proposal” to: (A) “20% or more of the outstanding voting securities of AOC or rights or interests therein” shall be deemed to be references to “50% or more of the outstanding voting securities of AOC or rights or interests therein”; and (B) “20% or more of the assets” shall be deemed to be references to “50% or more of the assets”;

(d) “ affiliate ” and “ associate ” have the meanings ascribed thereto in the Securities Act;
(e) “ Agreement ”, “ herein ”, “ hereof ”, “ hereto ”, “ hereunder ” and similar expressions mean and refer to this arrangement agreement (including the schedules hereto) as supplemented, modified or amended, and not to any particular Article, Section, Schedule or other portion hereof;
(f) “ AOC ” means Astra Oil Corp., a corporation existing under the ABCA;
(g) “ AOC Arrangement Resolution ” means the special resolution of AOC Shareholders in respect of the Arrangement to be considered at the AOC Meeting substantially in the form attached as Exhibit “B” hereto;
(h) “ AOC Assets ” means all of the assets, properties, facilities, Governmental Authorizations, rights or other privileges (whether contractual or otherwise) of, and securities owned by, AOC, and, for greater certainty, including the AOC Interests and the AOC Office Leases;
(i) “ AOC Board ” means the board of directors of AOC as it may be comprised from time to time;
(j) “ AOC Budget ” means the consolidated 2021 forecast of AOC dated June 11, 2021, a copy of which was included in the AOC Disclosure Letter, as the same may be amended after the date hereof by agreement of AOC and Surge;
(k) “ AOC Closing Share Register ” has the meaning ascribed thereto in Section 3.1(x);
(l) “ AOC Credit Facilities ” means the credit facilities of AOC, comprised of: (i) a $50 million uncommitted demand revolving credit facility; (ii) a $100,000 MasterCard facility; and (iii) a risk management facility, in each case with National Bank of Canada;
(m) “ AOC D&O Shareholders ” means each director and officer of AOC holding AOC Shares, except for such directors and officers that are AOC Lock-up Shareholders;
(n) “ AOC D&O Support Agreements ” means an agreement to be entered into as of the date hereof (or hereafter) between Surge and each AOC D&O Shareholder, in form satisfactory to each of AOC and Surge, acting reasonably, pursuant to which such AOC D&O Shareholder agrees with Surge, among other things (but subject to the terms and conditions of (and exceptions under) such agreement with such AOC D&O Shareholder):
(i) to vote in favour of the AOC Arrangement Resolution and otherwise support the transactions contemplated by this Agreement; and
(ii) to place resale restrictions on certain Surge Shares so acquired by the AOC D&O Shareholder pursuant to the Arrangement;
(o) “ AOC Disclosure Letter ” means the disclosure letter from AOC to Surge dated the date hereof;
(p) “ AOC Fairness Opinion ” means the opinion of the AOC Financial Advisor to the effect that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications set forth therein, the consideration to be received by AOC Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the AOC Shareholders;
(q) “ AOC Financial Advisor ” means National Bank Financial Inc., or such other financial advisor engaged by AOC with the written consent of Surge (which consent will not be unreasonably withheld or delayed);
(r) “ AOC Financial Advisory Agreement ” means the engagement agreement between AOC and the AOC Financial Advisor;
(s) “ AOC Financial Advisory Fees ” means the fees or other amounts payable by AOC under the AOC Financial Advisory Agreement;
(t) “ AOC Financial Statements ” means, collectively, the audited financial statements of AOC as at and for the years ended December 31, 2020 and 2019, together with the notes thereto and the auditors’ report thereon and the interim unaudited financial statements of AOC for the three month period ended March 31, 2021, together with the notes thereto;
(u) “ AOC Information ” means all information to be included in the Information Circular describing AOC, the business, operations and affairs AOC and the matters to be considered at the AOC Meeting;
(v) “ AOC Interests ” has the meaning ascribed thereto in Section 4.1(v);
(w) “ AOC Lock-Up Agreements ” means an agreement to be entered into as of the date hereof (or hereafter) between Surge and each AOC Lock-Up Shareholder, in form satisfactory to each of AOC and Surge, acting reasonably, pursuant to which such AOC Lock-Up Shareholder agrees with Surge, among other things (but subject to the terms and conditions of (and exceptions under) such agreement with such AOC Lock-Up Shareholder):
(i) to vote in favour of the AOC Arrangement Resolution and otherwise support the transactions contemplated by this Agreement; and
(ii) to place resale restrictions on certain Surge Shares so acquired by the AOC Lock-Up Shareholder pursuant to the Arrangement;

-2-

(x) “ AOC Lock-up Shareholders ” means each AOC Shareholder who, collectively with its affiliates and any Persons acting jointly or in concert with such AOC Shareholder, will have the right to receive a number of Surge Shares equal to 5% or more of the outstanding Surge Shares pro forma the completion of the Arrangement;
(y) “ AOC Material Contracts ” has the meaning ascribed thereto in Section 4.1(vv);
(z) “ AOC Meeting ” means the special meeting of AOC Shareholders to be held to consider the AOC Arrangement Resolution and related matters, and any adjournment(s) or postponement(s) thereof;
(aa) “ AOC Net Debt ” means, the net debt of AOC which includes any and all cash, bank debt (including all amounts drawn under the AOC Credit Facilities), outstanding amounts under the NRCan Repayable Contribution Agreement net of the forgivable portion (as set out in such agreement), working capital deficit (inclusive of accounts receivable, prepaid expenses and deposits, accounts payable), income taxes receivable, and any and all other liabilities, in each case with respect to each of the foregoing liabilities, inclusive of any and all accrued liabilities, excluding the mark to market value of financial instruments, deferred taxes and decommissioning provision, calculated in accordance with GAAP, which for greater certainty, shall exclude the AOC Transaction Costs;
(bb) “ AOC Office Leases ” has the meaning ascribed thereto in Section 4.1(bb);
(cc) “ AOC Option Plan ” means the stock option plan of AOC in effect on the date hereof and the agreements entered into thereunder;
(dd) “ AOC Options ” means options granted pursuant to the AOC Option Plan;
(ee) “ AOC Plans ” has the meaning ascribed thereto in Section 4.1(ww);
(ff) “ AOC Reserves Report ” has the meaning ascribed thereto in Section 4.1(pp);
(gg) “ AOC Shareholder Agreement ” means the shareholder agreement dated October 1, 2014 by and among AOC and certain of the AOC Shareholders;
(hh) “ AOC Shareholders ” means holders of AOC Shares;
(ii) “ AOC Shares ” means the common shares in the capital of AOC;
(jj) “ AOC Support Agreements ” means an agreement to be entered into as of the date hereof (or hereafter) between Surge and each AOC Supporting Shareholder who is not an AOC Lock-Up Shareholder or an AOC D&O Shareholder, if applicable, in a form satisfactory to each of AOC and Surge, acting reasonably, pursuant to which such AOC Supporting Shareholder agrees with Surge, among other things (but subject to the terms and conditions of (and exceptions under) such agreement with such AOC Supporting Shareholder) to vote in favour of the AOC Arrangement Resolution,
(kk) “ AOC Supporting Shareholders ” means, collectively: (i) the AOC D&O Shareholders; (ii) the AOC Lock-up Shareholders; and (iii) certain other AOC Shareholders, who collectively represent, in aggregate not less than 66.67% of the AOC Shares;
(ll) “ AOC Termination Amount ” has the meaning ascribed thereto in Section 6.1;
(mm) “ AOC Termination Payments ” means obligations of AOC, pursuant to all employment, director compensation programs, termination, severance, change of control, bonus and retention plans or policies for severance, termination, change of control, bonus or retention payments, any payments related to any incentive plan and any other payments AOC is required by law or contract or intends to make in connection with the termination of all employees of AOC at the Effective Time in accordance with the terms of this Agreement, arising out of or in connection with the Arrangement;
(nn) “ AOC Third Party Beneficiaries ” has the meaning ascribed thereto in Section 10.10;

(oo) “ AOC Transaction Costs ” means, without duplication, all costs and expenses incurred by AOC in connection with the transactions contemplated by this Agreement, including all legal, accounting, engineering, financial advisory (including the AOC Financial Advisory Fees and the costs of the AOC Fairness Opinion), severance, bonuses, printing and other administrative or professional fees, costs and expenses of third parties incurred by AOC or the AOC Board (or any committee thereof), and all amounts payable by AOC in respect of the Arrangement, including the costs of obtaining “run off” directors’ and officers’ liability insurance in accordance with Section 2.8, and, without duplication, including the AOC Termination Payments;

(pp) “ AOC Warrants ” means the performance warrants of AOC, each such AOC Warrant entitling the holder to acquire, upon payment of the exercise price thereunder, one (1) AOC Share pursuant to the terms of the warrant certificate representing such AOC Warrants, as may be amended as and to the extent set forth in Section 2.5;
(qq) “ Applicable Laws ”, in the context that refers to one or more Persons, means any domestic or foreign, federal, state, provincial or local law (statutory, common or otherwise), constitution, ordinance, code, rule, regulation, order or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority, and any terms and conditions of any grant of approval, permission, authority or license of any Governmental Authority, that is binding upon or applicable to such Person or Persons or its or their business, undertaking, property or securities and emanate from a Person having jurisdiction over the Person or Persons or its or their business, undertaking, property or securities, as the same may be amended from time to time prior to the Effective Date;
(rr) “ Applicable Securities Laws ” means, collectively, and as the context may require, the applicable securities legislation of each of the Provinces and Territories of Canada, and the rules, regulations, instruments, orders and policies published and/or promulgated thereunder, as such may be amended from time to time prior to the Effective Date;

-3-

(ss) “ ARC Request ” has the meaning ascribed thereto in Section 3.3(d)(i);
(tt) “ Arrangement ” means the arrangement under the provisions of section 193 of the ABCA, on the terms and conditions set forth in the Plan of Arrangement;
(uu) “ Articles of Arrangement ” means the articles of arrangement in respect of the Arrangement required under subsection 193(10) of the ABCA to be sent to the Registrar after the Final Order has been granted, giving effect to the Arrangement;
(vv) “ BOE/d ” means barrels of oil equivalent per day based on a conversion ratio of six thousand cubic feet of natural gas per one barrel of oil;
(ww) “ Business Day ” means a day on which banks are generally open for the transaction of commercial business in Calgary, Alberta, but does not in any event include a Saturday or Sunday or statutory holiday in Alberta;
(xx) “ Certificate ” has the meaning ascribed thereto in the Plan of Arrangement;
(yy) “ Commissioner of Competition ” means the Commissioner of Competition appointed under the Competition Act and any Person authorized under the Competition Act to exercise the powers and perform the duties of the Commissioner of Competition;
(zz) “ Competition Act ” means the Competition Act , R.S.C. 1985, c. C 34, as amended;
(aaa) “ Competition Act Approval ” means:
(i) the issuance of an advance ruling certificate under section 102 of the Competition Act;
(ii) the Parties have given the notice required under section 114 of the Competition Act with respect to the transactions contemplated by the Agreement and the applicable waiting period under section 123 of the Competition Act has expired or been waived in accordance with the Competition Act; or
(iii) the obligation to submit a notification has been waived pursuant to subsection 113(c) of the Competition Act,

and in the case of (ii) or (iii), Surge or AOC (directly or through either Parties’ counsel) have been advised in writing by the Commissioner of Competition that he does not, at that time, intend to make an application under section 92 of the Competition Act for an order in respect of the transactions contemplated by this Agreement (“ No-Action Letter ”), and the form of and any terms and conditions attached to any such advice are acceptable to the Parties, acting reasonably, and such advice has not been rescinded or amended;

(bbb) “ Confidential Information ” has the meaning ascribed thereto in Section 3.4(g);
(ccc) “ Confidentiality Agreements ” means the confidentiality agreements dated April 16, 2021 and May 31, 2021, respectively, each between Surge and AOC;
(ddd) “ Consideration ” has the meaning ascribed thereto in the Plan of Arrangement;
(eee) “ Contract ” means, with respect to a Party, a contract, lease, instrument, note, bond, debenture, mortgage, agreement, arrangement or understanding, written or oral, to which such Party is a Party or under which such Party is bound, has unfulfilled obligations or contingent liabilities or under which such Party is owed unfulfilled obligations, whether known or unknown, and whether asserted or not;
(fff) “ Court ” means the Court of Queen’s Bench of Alberta;
(ggg) “ CRA ” means the Canada Revenue Agency;
(hhh) “ Depositary ” has the meaning ascribed thereto in the Plan of Arrangement;
(iii) “ Disclosed Personal Information ” has the meaning ascribed thereto in Section 4.3(b);
(jjj) “ Dissent Rights ” means the rights of dissent granted pursuant to section 191 of the ABCA in favour of registered AOC Shareholders in respect of the Arrangement as described in the Plan of Arrangement and the Interim Order;
(kkk) “ distribution ” means “ distribution ” or “ distribution to the public ”, as the case may be, as defined under the Applicable Securities Laws; and “ distribute ” has a corresponding meaning;
(lll) “ Effective Date ” means the date the Arrangement becomes effective pursuant to the ABCA, being the date shown on the Certificate;
(mmm) “ Effective Time ” means the time on the Effective Date when the Arrangement becomes effective pursuant to the ABCA;
(nnn) “ Encumbrances ” means, in the case of property or an asset, all mortgages, pledges, charges, liens, debentures, hypothecs, trust deeds, rights of first refusal, outstanding demands, burdens, capital leases, assignments by way of security, security interests, conditional sales contracts or other title retention agreements or similar interests or instruments charging, or creating a security interest in, or against title to, such property or asset, or any part thereof or interest therein, and any agreements, leases, options, easements, rights of way, restrictions, executions or other charges or encumbrances (including notices or other registrations in respect of any of the foregoing) (whether by Applicable Law, contract or otherwise) against title to any of such property or asset, or any part thereof or interest therein;

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(ooo) “ Environment ” means the natural environment (including soil, land surface or subsurface strata), surface waters, groundwater, sediment, ambient air (including all layers of the atmosphere), organic and inorganic matter and living organisms, and any other environmental medium or natural resource and all sewer systems;
(ppp) “ Environmental Approvals ” means all permits, certificates, licences, authorizations, consents, instructions, registrations, directions or approvals issued or required by Governmental Authorities pursuant to Environmental Laws;
(qqq) “ Environmental Laws ” means all Applicable Laws relating in whole or in part to the protection of the Environment and employee and public health and safety, and includes, without limitation, those Applicable Laws relating to the storage, generation, use, handling, manufacture, processing, labeling, advertising, sale, display, transportation, treatment, release and disposal of Hazardous Substances;
(rrr) “ Final Order ” means the order of the Court approving the Arrangement pursuant to subsection 193(9) of the ABCA, as such order may be affirmed, amended or modified by the Court (with the consent of each of AOC and Surge, each acting reasonably) at any time prior to the Effective Date or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed or as amended (provided that such amendment is acceptable to each of AOC and Surge, each acting reasonably) on appeal;
(sss) “ GAAP ” has the meaning ascribed thereto in Section 1.8;
(ttt) “ Governmental Authority ” means any:
(i) multinational, federal, provincial, state, regional, municipal, local or other government or any governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau, ministry or agency, domestic or foreign;
(ii) any subdivision, agent, commission, board or authority of any of the foregoing;
(iii) any quasi-governmental or private body exercising any regulatory, expropriation or Taxing Authority under or for the account of any of the foregoing; and
(iv) any stock exchange;
(uuu) “ Governmental Authorization ” means with respect to a Person, all licenses, permits, certificates, consents, orders, grants, registrations, recognition orders, exemption relief orders, no-action relief and other authorizations (including in connection with Environmental Laws) from any Governmental Authority necessary in connection with its business as it is now being or proposed to be conducted;
(vvv) “ Hazardous Substances ” means any element, waste or other substance whether natural or artificial and whether consisting of gas, liquid, solid or vapour that is prohibited, listed, defined, designated or classified as dangerous, hazardous, radioactive, explosive or toxic or a pollutant or a contaminant under or pursuant to any applicable Environmental Laws, and specifically including petroleum and all derivatives thereof or synthetic substitutes therefor and asbestos or asbestos-containing materials or any substance which is deemed under Environmental Laws to be deleterious to the Environment or worker or public health and safety;
(www) “ Information Circular ” means the notice of AOC Meeting, the notice of Surge Meeting and the accompanying joint management information circular of AOC and Surge, together with all appendices thereto, to be mailed or otherwise distributed by AOC to the AOC Shareholders and Surge to the Surge Shareholders and such other securityholders of AOC or Surge as may be required pursuant to the Interim Order in connection with the AOC Meeting and the Surge Meeting pursuant to Applicable Laws;
(xxx) “ Interim Order ” means an interim order of the Court concerning the Arrangement under subsection 193(4) of the ABCA containing declarations and directions with respect to the Arrangement and the holding of the AOC Meeting as such order may be affirmed, amended or modified by the Court;
(yyy) “ Liabilities ” means any and all debts, liabilities and obligations of any nature whatsoever, whether accrued or fixed, absolute or contingent, including those arising under any Applicable Law, Contract, Governmental Authorization or other undertaking and as a result of any act or omission, but specifically excludes the value of any hedges;
(zzz) “ Material Adverse Change ” or “ Material Adverse Effect ” means, with respect to either Party, any fact or state of facts, circumstance, change, effect, occurrence or event that individually or in the aggregate is, or would reasonably be expected to be, material and adverse to the condition (financial or otherwise), business, operations, properties, licenses, affairs, assets, liabilities (contingent or otherwise), capitalization, results of operations, cash flows or prospects of such Party (taken as a whole), or will, or would reasonably be expected to, prevent, materially delay or materially impair the ability of the Parties to consummate the transactions contemplated by this Agreement, other than any fact, state of facts, circumstance, change, effect, occurrence or event relating to or resulting from:
(i) any change, development or condition in or relating to global, national or regional political conditions (including strikes, lockouts, riots, blockades or facility takeover for emergency purposes) or in general economic, business, banking, regulatory, currency exchange, interest rate, rates of inflation or market conditions or in national or global financial or capital markets;
(ii) conditions affecting the oil and gas industry generally in jurisdictions in which such Party carries on business, including any change in the market price of crude oil, natural gas or related hydrocarbons on a current of forward basis;
(iii) any change, development or condition resulting from any act of terrorism or any outbreak of hostilities or declared or undeclared war, or any escalation or worsening of such acts of terrorism, hostilities or war;

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(iv) any adoption, proposal, implementation or change in Applicable Law or in any interpretation, application or non-application of any Applicable Laws by any Governmental Authority (including, for greater certainty, any change to the Tax Act or other applicable taxing legislation or to tax rates) including changes in Applicable Laws (including Tax Laws) and royalties;
(v) any climatic, earthquake or other natural event or condition (including weather conditions and any natural disaster);
(vi) any epidemic, pandemic, disease outbreak (including COVID-19), other health crisis or public health event;
(vii) any matter which has been publicly disclosed prior to the date hereof or that is set forth in either of the AOC Disclosure Letter or the Surge Disclosure Letter, as applicable;
(viii) any changes or effects arising, directly or indirectly, from the Arrangement or any other matters or actions permitted or contemplated by this Agreement, including any public announcement of the foregoing, or consented to or approved in writing by the Other Party; or
(ix) with respect to Surge, a change in the market trading price or trading volume of the Surge Shares (provided, however, that the causes underlying such changes may be considered to determine whether such causes constitute a Material Adverse Change or Material Adverse Effect),

provided, however, that (A) the change or effect referred to in clause (i) to (vi) above does not primarily relate only to (or have the effect of primarily relating only to) the applicable Party or disproportionately affects the applicable Party compared to other entities of similar size operating in the oil and gas exploration, exploitation, development and production industry, in which case the relevant exclusion from this definition of Material Adverse Change or Material Adverse Effect referred to above shall not be applicable; and (B) unless expressly provided in any particular section of this Agreement, references in certain sections of this Agreement to dollar amounts are not intended to be, and shall not be deemed to be, illustrative or interpretive for purposes of determining whether a “Material Adverse Change” or “Material Adverse Effect” has occurred;

(aaaa) “ misrepresentation ”, “ material change ” and “ material fact ” shall have the meanings ascribed thereto under Applicable Securities Laws;
(bbbb) “ No-Action Letter ” has the meaning ascribed thereto in Section 1.1(aaa);
(cccc) “ Non-Resident Vendor ” has the meaning ascribed thereto in the Plan of Arrangement;

(dddd) “ NRCan Repayable Contribution Agreement ” means the Department of Natural Resources, The Emissions Reduction Fund, Onshore Technology Deployment Repayable Contribution Agreement effective March 17, 2021 between AOC and Her Majesty the Queen in Right of Canada, represented by the Minister of Natural Resources;

(eeee) “ Other Party ” means, with respect to:
(i) AOC, Surge; and
(ii) Surge, AOC;
(ffff) “ Outside Date ” means October 31, 2021 or such other date as the Parties may agree in writing;
(gggg) “ Parties ” means AOC and Surge, and “ Party ” means any one of them;
(hhhh) “ Person ” includes any individual, firm, partnership, joint venture, venture capital fund, association, trust, trustee, executor, administrator, legal personal Representative, estate group, body corporate, corporation, unincorporated association or organization, Governmental Authority, syndicate or other entity, whether or not having legal status;
(iiii) “ Plan of Arrangement ” means the plan of arrangement under the ABCA in the form set forth in Exhibit “A” to this Agreement, as such plan of arrangement may be amended or supplemented from time to time in accordance with the terms thereof and Article 7 hereof;
(jjjj) “ Registrar ” means the Registrar of Corporations or a Deputy Registrar of Corporations appointed under section 263 of the ABCA;
(kkkk) “ Representatives ” has the meaning ascribed thereto in Section 3.4(a);
(llll) “ Securities Act ” means the Securities Act , R.S.A. 2000, c. S-4, as amended; (mmmm) “ Securities Authorities ” means, collectively, the securities commissions or similar securities regulatory authorities in each of the Provinces or Territories of Canada;
(nnnn) “ Sproule ” means Sproule Associates Limited;
(oooo) “ subsidiary ” has the meaning ascribed thereto in the Securities Act (and shall include all trusts or partnerships directly or indirectly owned or controlled by a Person);
(pppp) “ Superior Proposal ” means an unsolicited written bona fide Acquisition Proposal made after the date hereof from a Person (other than Surge):
(i) that is not subject to any financing condition, and in respect of any funds required to complete the Acquisition Proposal, such funds have been demonstrated to be readily available to the satisfaction of the AOC Board, acting in good faith (after receipt of advice from its financial advisors and outside legal counsel);

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(ii) that the AOC Board has determined in good faith (after receipt of advice from its financial advisors and outside legal counsel) is capable of being completed in accordance with its terms without undue delay, taking into account all financial, legal regulatory and other aspects of such proposal and the Person making such proposal;
(iii) that is in compliance with all Applicable Laws;
(iv) that did not result from or involve a breach of Section 3.4;
(v) that is not subject to any due diligence or access condition, other than to permit access to the books, records or personnel of AOC which is not more extensive than that which would customarily be provided for confirmatory due diligence purposes; and
(vi) in respect of which the AOC Board determined in good faith (after the receipt of advice from their legal counsel with respect to (A) and its financial advisors with respect to (B)) that: (A) in each case as reflected in the minutes of the AOC Board, in the case of paragraph 3.4(b)(vi)(A) failure to take such action would be inconsistent with its fiduciary duties, and in the case of paragraphs 3.4(b)(vii) and 3.4(d) failure to recommend such Acquisition Proposal to AOC Shareholders would be inconsistent with its fiduciary duties, and (B) such Acquisition Proposal, taking into account all of the terms and conditions thereof, if consummated in accordance with its terms (but not assuming away any risk of non-completion), would result in a transaction more favourable to AOC Shareholders from a financial point of view than the transactions contemplated by this Agreement (including in each case after taking into account any modifications to this Agreement proposed by the Parties as contemplated by Section 3.4(e));
(qqqq) “ Support and Hold Period Agreements ” means collectively, the AOC Support Agreements, the AOC Lock-Up Agreements and the AOC D&O Support Agreements;
(rrrr) “ Surge ” means Surge Energy Inc., a corporation incorporated under the ABCA;
(ssss) “ Surge Balance Sheet ” has the meaning ascribed thereto in Section 4.2(ee);
(tttt) “ Surge Board ” means the board of directors of Surge, as it may be comprised from time to time;
(uuuu) “ Surge Credit Facilities ” means the syndicated credit facilities of Surge, comprised of: (i) $215 million extendible revolving term, non-revolving term and operating credit facilities; and (ii) a $40 million non-revolving term credit facility maturing November 17, 2024, in each case with a syndicate of banks led by National Bank of Canada;
(vvvv) “ Surge Damages Event ” has the meaning ascribed thereto in Section 6.2;
(wwww) “ Surge Disclosure Letter ” means the disclosure letter from Surge to AOC dated the date hereof;
(xxxx) “ Surge Financial Statements ” means, collectively, the audited consolidated financial statements of Surge as at and for the years ended December 31, 2020 and 2019, together with the notes thereto and the auditors’ report thereon and the interim unaudited financial statements of Surge for the three month period ended March 31, 2021, together with the notes thereto;
(yyyy) “ Surge Information ” means all information to be included in the Information Circular (including in documents incorporated by reference) describing Surge, the business, operations and affairs of Surge and the matters to be considered at the Surge Meeting;
(zzzz) “ Surge Interests ” has the meaning ascribed thereto in Section 4.2(v);
(aaaaa) “ Surge Issuance Resolution ” means the ordinary resolution of Surge Shareholders in respect of the issuance of Surge Shares pursuant to the Arrangement and such other matters as may be required by the TSX to be considered at the Surge Meeting;
(bbbbb) “ Surge LTIP ” means the Surge stock incentive plan dated March 9, 2021 and the agreements entered into thereunder;
(ccccc) “ Surge Meeting ” means the meeting of Surge Shareholders to be held to consider the Surge Issuance Resolution and such other matters as may properly be brought before the meeting, and any adjournment(s) or postponement(s) thereof;
(ddddd) “ Surge PSAs ” means performance share awards granted pursuant to the Surge LTIP;
(eeeee) “ Surge Public Record ” means all information, documents and reports filed by or on behalf of Surge on or after January 1, 2021 with the Securities Authorities, in compliance, or intended compliance, with any Applicable Securities Laws which is available for public viewing on the SEDAR website under Surge’s profile at www.sedar.com;
(fffff) “ Surge Reserves Report ” has the meaning ascribed thereto in Section 4.2(r);
(ggggg) “ Surge RSAs ” means restricted share awards granted pursuant to the Surge LTIP;
(hhhhh) “ Surge Shareholders ” means the holders of Surge Shares;
(iiiii) “ Surge Shares ” means the common shares in the capital of Surge;
(jjjjj) “ Surge Subsidiary ” means 1413942 Alberta Ltd.;
(kkkkk) “ Surge Termination Fee ” has the meaning ascribed thereto in Section 6.2;
(lllll) “ Tax ” or “ Taxes ” shall mean any and all taxes, duties, fees, excises, premiums, assessments, imposts, levies and other charges or assessments of any kind whatsoever however denominated, including any interest, penalties or other additions that may become payable in respect thereof, imposed by any Taxing Authority, whether computed on a separate, consolidated, unitary, combined or

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other basis, which taxes shall include, without limiting the generality of the foregoing, all income or profits taxes (including, but not limited to, federal income taxes and provincial income taxes), payroll and employee withholding taxes, employment insurance premiums, unemployment insurance, social insurance taxes, Canada Pension Plan contributions, sales, use and goods and services taxes, value added taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes, environmental taxes, capital taxes, production taxes, recapture taxes, withholding taxes, employee health taxes, surtaxes, customs, import and export taxes, business license taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes, transfer taxes, workers’ compensation and other governmental charges, and other obligations of the same or of a similar nature to any of the foregoing, which a Party, or any of its subsidiaries, as applicable, is required to pay, withhold, remit or collect;

(mmmmm) “ Tax Act ” means the Income Tax Act (Canada), R.S.C. 1985, c. 1 (5th Supp.), including the regulations promulgated thereunder;
(nnnnn) “ Tax Pools ” means undepreciated capital cost of any particular class of depreciable property, earned depletion base, cumulative Canadian exploration expense, cumulative Canadian development expense, cumulative Canadian oil and gas property expense, foreign exploration and development expense, capital losses, non-capital losses, cumulative eligible capital, share issue and loan financing costs and investment tax credits, all as defined in the Tax Act, financing expenses referred to in paragraph 20(1)(e) of the Tax Act, and scientific research and experimental development tax referred to in section 127.3 of the Tax Act;
(ooooo) “ Tax Returns ” shall mean all reports, estimates, elections, notices, filings, designations, forms, declarations of estimated tax, information statements and returns relating to, or required to be supplied to any Taxing Authority in connection with, any Taxes (including any attached schedules, estimated tax returns, withholding tax returns, and information returns and reports), including any amendments thereto;
(ppppp) “ Taxing Authority ” shall mean any Governmental Authority responsible for the imposition of any Tax (domestic or foreign);
(qqqqq) “ threatened ” when used in relation to legal action or any other matter, means that a written demand or statement has been made or a written notice has been given that such legal action or other matter is to be asserted, commenced, taken or otherwise pursued in the future or that an event has occurred or circumstances exist that would lead a reasonable Person to conclude that such legal action or other matter is likely to be asserted, commenced, taken or otherwise pursued in the future;
(rrrrr) “ TSX ” means the Toronto Stock Exchange;
(sssss) “ United States ” means the United States of America, its territories and possessions, any state of the United States, and the District of Columbia; and
(ttttt) “ U.S. Securities Act ” means the United States Securities Act of 1933, as amended, and the rules, regulations and orders promulgated thereunder.

1.2 Interpretation Not Affected by Headings, etc.

The division of this Agreement into articles, sections and subsections is for convenience of reference only and does not affect the construction or interpretation of this Agreement. The terms “this Agreement”, “hereof”, “herein” and “hereunder” and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof and include any agreement or instrument supplementary or ancillary hereto.

1.3 Number and Gender

Words importing the singular number include the plural and vice versa and words importing the use of any gender include all genders.

1.4 Date for Any Action

If any date on which any action is required to be taken hereunder by either Party is not a Business Day, such action is required to be taken on the next succeeding day which is a Business Day.

1.5 Entire Agreement

This Agreement, the Confidentiality Agreements, the Surge Disclosure Letter and the AOC Disclosure Letter, together with the agreements and documents herein and therein referred to, constitute the entire agreement between the Parties pertaining to the subject matter hereof and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, between the Parties with respect to the subject matter hereof. To the extent of any inconsistency between this Agreement and the Confidentiality Agreements, this Agreement shall supersede the Confidentiality Agreements.

1.6 Statute and Agreement References

Any reference in this Agreement to any statute or any section thereof shall, unless otherwise expressly stated, be deemed to be a reference to such statute or section as amended, restated or re-enacted from time to time. References to any agreement or document shall be to such agreement or document (together with all schedules and exhibits thereto), as it may have been or may hereafter be amended, supplemented, replaced or restated from time to time.

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1.7 Currency

All sums of money that are referred to in this Agreement are expressed in lawful money of Canada unless otherwise noted.

1.8 Accounting Matters

Unless otherwise stated, all accounting terms used in this Agreement shall have the meanings attributable thereto under generally accepted accounting principles (“ GAAP ”) from time to time approved by the Chartered Professional Accountants of Canada, or any successor institute, which, for greater certainty, shall include International Financial Reporting Standards, and all determinations of an accounting nature required to be made shall be made in accordance with GAAP applicable as at the date on which such calculation is made or required to be made on a basis consistent with preceding years but subject to the adoption of any new accounting principles and rules and the transition rules pertaining thereto.

1.9 Interpretation Not Affected by Party Drafting

The Parties hereto acknowledge that their respective legal counsel have reviewed and participated in settling the terms of this Agreement, and the Parties agree that any rule of construction to the effect that any ambiguity is to be resolved against the drafting party will not be applicable in the interpretation of this Agreement.

1.10 Knowledge

Where any representation or warranty contained in this Agreement is expressly qualified by reference to the knowledge of AOC or Surge, as applicable, it refers to the actual knowledge of the President, Chief Executive Officer, Chief Financial Officer and any Vice President of AOC in respect of AOC, and the President, Chief Executive Officer, Chief Operating Officer and any Vice President of Surge in respect of Surge, in each case after reasonable inquiry and in each case in their capacity as officers of AOC or Surge, as applicable, and not in their personal capacity, as of the date of this Agreement and does not include the knowledge or awareness of any other individual or any constructive, implied or imputed knowledge.

1.11 Enforceability

All representations, warranties, covenants and opinions in or contemplated by this Agreement as to the enforceability of any covenant, agreement or document are subject to enforceability being limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally, and the discretionary nature of certain remedies (including specific performance and injunctive relief and general principles of equity).

1.12 Exhibits

The following exhibits attached hereto are incorporated into and form an integral part of this Agreement:

Exhibit “A” — Plan of Arrangement Exhibit “B” — AOC Arrangement Resolution Exhibit “C” — Surge Issuance Resolution

ARTICLE 2 THE ARRANGEMENT

2.1 Plan of Arrangement

(a) The Parties agree to carry out the Arrangement pursuant to which (among other things):
(i) the Arrangement shall be implemented in accordance with and subject to the terms and conditions contained in this Agreement and the Plan of Arrangement;
(ii) as soon as reasonably practicable, but in any event not later than July 26, 2021 or such other date as is agreed to by the Parties, AOC shall apply to the Court, in a manner reasonably acceptable to AOC and Surge, pursuant to section 193(4) of the ABCA for the Interim Order and thereafter diligently seek the Interim Order as provided for in Section 2.2 hereof, and, upon receipt thereof, AOC and Surge shall forthwith carry out the terms of the Interim Order to the extent applicable to it;
(iii) provided all necessary approvals for the AOC Arrangement Resolution and Surge Issuance Resolution are obtained from the AOC Shareholders and Surge Shareholders, respectively, AOC shall submit the Arrangement to the Court and apply for the Final Order; and
(iv) upon the issuance of the Final Order and subject to the satisfaction or waiver of the conditions precedent in Article 5, Surge shall forthwith proceed to file the Articles of Arrangement, the Final Order and such other documents as may be required to give effect to the Arrangement with the Registrar pursuant to subsection 193(9) of the ABCA, whereupon the transactions comprising the Arrangement shall occur and shall be deemed to have occurred in the order set forth therein without any further act or formality.

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(b) The Arrangement shall be structured such that on the Effective Date the issuance of the Surge Shares issuable to the AOC Shareholders, pursuant to the Arrangement, and all other trades of securities pursuant to the Arrangement will be made in compliance with Applicable Securities Laws.
(c) The Arrangement shall be structured and executed such that, assuming the Court considers the fairness of the terms and conditions of the Arrangement and grants the Final Order, the issuance of the Surge Shares issuable to AOC Shareholders under the Arrangement will not require registration under the U.S. Securities Act, in reliance upon section 3(a)(10) thereof. Each Party agrees to act in good faith, consistent with the intent of the Parties and the intended treatment of the Arrangement as set out in this Section 2.1(c).

2.2 Interim Order

The notice of originating application for the Interim Order shall request that the Interim Order shall provide:

(a) for the calling and holding of the AOC Meeting, including the record date for determining the Persons to whom notice of the AOC Meeting is to be provided and for determining the Persons entitled to vote at the AOC Meeting and for the manner in which such notice is to be provided;
(b) that the securities of AOC for which holders as at the record date established for the AOC Meeting shall be entitled to vote on the AOC Arrangement Resolution shall be the AOC Shares;
(c) that the AOC Shareholders as at the record date established for the AOC Meeting shall be entitled to vote on the AOC Arrangement Resolution, with each AOC Shareholder being entitled to one vote for each AOC Share held by such holder;
(d) that the requisite level of approval of the AOC Arrangement Resolution shall be two-thirds of the votes cast in respect of the AOC Arrangement Resolution by the AOC Shareholders present in person or by proxy and entitled to vote at the AOC Meeting;
(e) except as required by Applicable Law, the record date for the AOC Shareholders entitled to notice of and to vote at the AOC Meeting will not change in respect or as a consequence of any adjournment(s) or postponement(s) of the AOC Meeting;
(f) that the AOC Meeting may be adjourned or postponed from time to time by AOC in accordance with this Agreement without the need for additional approval by the Court; and
(g) rights of dissent shall be granted to those AOC Shareholders who are registered AOC Shareholders as provided for in the Plan of Arrangement.

2.3 Information Circular and Meetings

As promptly as practical following the execution of this Agreement and in compliance with Applicable Laws:

(a) AOC shall prepare the AOC Information for inclusion in the Information Circular in a timely and expeditious manner;
(b) Surge shall prepare the Surge Information for inclusion in the Information Circular in a timely and expeditious manner;
(c) AOC shall cause the Information Circular to be mailed to the AOC Shareholders and filed with applicable Governmental Authorities in all jurisdictions where the same are required to be mailed and filed;
(d) Surge shall cause the Information Circular to be mailed to the Surge Shareholders and filed with applicable Governmental Authorities in all jurisdictions where the same are required to be mailed and filed;
(e) AOC shall set the record date for the AOC Shareholders entitled to vote at the AOC Meeting as promptly as practicable if such date has not already been set, convene and conduct the AOC Meeting in accordance with the Interim Order, the terms, restrictions and conditions of AOC’s articles, by-laws and Applicable Laws on or about August 17, 2021, subject to Section 2.3(h), for the purpose of considering the AOC Arrangement Resolution and for any other proper purpose as may be set out in the Information Circular and not adjourn, postpone or cancel (or propose the adjournment, postponement or cancellation of) the AOC Meeting without the prior written consent of Surge, acting reasonably, except as set forth in Section 2.3(h);
(f) Surge shall set the record date for the Surge Shareholders entitled to vote at the Surge Meeting as promptly as practicable if such date has not already been set, convene and conduct the Surge Meeting in accordance with the terms, restrictions and conditions of Surge’s articles, by-laws and Applicable Laws on or about August 17, 2021, subject to Section 2.3(j), for the purpose of considering the Surge Issuance Resolution and for any other proper purpose as may be set out in the Information Circular and not adjourn, postpone or cancel (or propose the adjournment, postponement or cancellation of) the Surge Meeting without the prior written consent of AOC, acting reasonably, except as set forth in Section 2.3(j);
(g) AOC shall use commercially reasonable efforts to solicit proxies in favour of the approval of the AOC Arrangement Resolution and will:
(i) as promptly as reasonably practicable, advise Surge, at such times as Surge may reasonably request and at least on a daily basis on each of the last seven (7) Business Days prior to the date of the AOC Meeting, as to the aggregate tally of the proxies received by AOC in respect of the AOC Arrangement Resolution;
(ii) as promptly as reasonably practicable, advise Surge of any purported exercise or withdrawal of Dissent Rights, if AOC receives any written notice of dissent, and of any written communications sent by or on behalf of AOC to any AOC Shareholder exercising or purporting to exercise Dissent Rights (and provide copies to Surge); and

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(iii) not make any payment or settlement offer, or agree to any payment or settlement with respect to Dissent Rights without the prior written consent of Surge;
(h) in the event that, following receipt of the tally of proxies referred to in Section 2.3(g), quorum will not be present at the AOC Meeting, or the AOC Arrangement Resolution is unlikely to receive the requisite approval, AOC shall adjourn or postpone the AOC Meeting, provided that the AOC Meeting, so adjourned or postponed, shall be held at least five (5) Business Days after but not later than 10 Business Days after the date on which the AOC Meeting was originally scheduled;
(i) Surge shall use commercially reasonable efforts to solicit proxies in favour of the approval of the Surge Issuance Resolution and will, as promptly as reasonably practicable, advise AOC, at such times as AOC may reasonably request and at least on a daily basis on each of the last seven (7) Business Days prior to the date of the Surge Meeting as to the aggregate tally of the proxies received by Surge in respect of the Surge Issuance Resolution;
(j) in the event that, following receipt of the tally of proxies referred to in Section 2.3(i), quorum will not be present at the Surge Meeting, or the Surge Issuance Resolution is unlikely to receive the requisite approval, Surge shall adjourn or postpone the Surge Meeting, provided that the Surge Meeting, so adjourned or postponed, shall be held at least five (5) Business Days after but not later than 10 Business Days after the date on which the Surge Meeting was originally scheduled;
(k) the Parties shall prepare the Information Circular and other relevant documentation, in consultation with each other, and each of the Parties shall ensure that the Information Circular provides AOC Shareholders and Surge Shareholders with information in sufficient detail to permit them to form a reasoned judgment concerning the matters before them, in all cases ensuring compliance in all material respects with all Applicable Securities Laws;
(l) the AOC Information in the Information Circular must include: (i) a copy of the AOC Fairness Opinion; and (ii) the determinations and recommendations set forth in Section 2.9;
(m) the Surge Information in the Information Circular must include the determinations and recommendations set forth in Section 2.10; and
(n) each Party shall promptly notify the Other Party if it becomes aware that the Information Circular contains a misrepresentation, or otherwise requires an amendment or supplement. The Parties shall cooperate in the preparation of any such amendment or supplement as required or appropriate, and AOC and Surge shall promptly mail, file or otherwise publicly disseminate any such amendment or supplement to the AOC Shareholders and Surge Shareholders and, if required by the Court or by Applicable Laws, file the same with the applicable Governmental Authority.

2.4 Preparation of Filings

(a) AOC and Surge shall cooperate in:
(i) seeking the Interim Order and the Final Order, including by:
- (A) AOC providing Surge on a timely basis any information required to be supplied by AOC concerning itself in connection therewith;
- (B) Surge providing AOC on a timely basis any information required to be supplied by Surge concerning itself in connection therewith; and
- (C) AOC providing Surge and legal counsel to Surge with reasonable opportunity to review and comment upon drafts of all material to be filed with the Court in connection with the Arrangement, and giving reasonable consideration to all such comments. AOC shall also provide legal counsel to Surge on a timely basis with copies of any notice of appearance and evidence served on AOC or its legal counsel in respect of the application for the Final Order or any appeal therefrom. Subject to Applicable Laws, AOC shall not file any material with the Court in connection with the Arrangement or serve any such material, and shall not agree to modify or amend materials so filed or served, except with Surge’s prior written consent, such consent not to be unreasonably withheld, conditioned or delayed; provided that nothing herein shall require Surge to agree or consent to any increase in the consideration to be received by the AOC Shareholders or other modification or amendment to such filed or served materials that expands or increases Surge’s obligations, or diminishes or limits Surge’s rights, set forth in any such filed or served materials or under this Agreement; and
(ii) the taking of all such action as may be required under the ABCA, Applicable Securities Laws and Applicable Laws in connection with the transactions contemplated by this Agreement and the Plan of Arrangement.
(b) Each of AOC and Surge shall promptly furnish to the Other Party all information concerning it as may be required for the effectuation of the actions described in Section 2.1 and the foregoing provisions of this Section 2.4, and each covenants that no information furnished by it in connection with such actions or otherwise in connection with the consummation of the Arrangement and the other transactions contemplated by this Agreement will contain any misrepresentation at the time such information is filed with the Court or printed for distribution to the securityholders of the Parties, as the case may be.
(c) Surge shall not file any material with the Court in connection with the Arrangement or serve any such material or agree to modify or amend materials so filed or served except as contemplated hereby or with the prior written consent of AOC, such consent not to be unreasonably withheld, conditioned or delayed.

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2.5 Treatment of AOC Options and AOC Warrants

(a) The AOC Disclosure Letter includes a list of all AOC Options and AOC Warrants outstanding on the date hereof, including without limitation the following: (i) the names of the holders of the AOC Options and AOC Warrants; (ii) the date of grant and the date of expiry of all AOC Options and AOC Warrants; (iii) the exercise price of each AOC Option and AOC Warrant; and (iv) the number of AOC Options and AOC Warrants held by each holder thereof.
(b) The Parties agree that the AOC Board may, to the extent necessary, approve the vesting of all outstanding AOC Options effective before the Effective Date and conditional upon the subsequent consummation of the Arrangement such that all AOC Options will be fully vested and may be exercised before the Effective Time in accordance with their terms. The Parties further agree that, conditional upon the Arrangement becoming effective, all outstanding AOC Options and AOC Warrants may be amended to the extent necessary, to allow the holders of AOC Options and AOC Warrants, respectively, to exercise the AOC Options and the AOC Warrants held by such holder on a “cashless exercise” basis, where the number of AOC Shares to be acquired for each AOC Option or AOC Warrant under such “cashless exercise” shall be equal to the “in-the-money amount” of each such AOC Option (being $2.00 less the exercise price of such AOC Option) or each such AOC Warrant (being $2.00 less the exercise price of such AOC Warrant) divided by $2.00 and the number of AOC Shares which a holder of AOC Options or AOC Warrants shall be entitled to receive pursuant to the “cashless exercise” of all such AOC Options or AOC Warrants, respectively, held by such holder shall be aggregated and shall be rounded up to the next whole number of AOC Shares if the fractional entitlement is equal to or greater than 0.5 and shall, without any additional compensation, be rounded down to the next whole number of AOC Shares if the fractional entitlement is less than 0.5.
(c) AOC shall use commercially reasonable efforts to obtain an agreement from each holder of AOC Options and each holder of AOC Warrants, which agreement shall provide that the holder of such AOC Options or AOC Warrants, as the case may be, will agree to either:
(i) conditionally exercise the AOC Options or AOC Warrants, as applicable, for AOC Shares at the applicable exercise price therefor and deliver to AOC prior to the Effective Date a cash payment equal to the sum of the aggregate exercise price for the AOC Options or AOC Warrants, as applicable, so exercised and the amount of any Taxes that AOC is required to remit to a Taxing Authority in respect of such exercise; or
(ii) conditionally exercise the AOC Options or AOC Warrants, as applicable, prior to the Effective Date on a “cashless exercise” basis, with the number of AOC Shares to be acquired under each AOC Option or AOC Warrant, as applicable, under such “cashless exercise” determined in accordance with Section 2.5(b),

and will additionally provide that, conditional upon the occurrence of the Effective Time, the holders of all “out-of-the-money” AOC Options and AOC Warrants (being each AOC Option or AOC Warrant with an exercise price of $2.00 or more), if any, shall surrender such “out-of-the-money” AOC Options and AOC Warrants, as applicable, to AOC for cancellation for an aggregate payment of $1.00 to each holder of such “out-of-the-money” AOC Options or AOC Warrants, as applicable, regardless of the number of AOC Options or AOC Warrants held by such holder.

(d) The Parties agree that no deduction will be claimed by AOC (or by any Person not dealing at arm’s length with AOC, including Surge) in computing its taxable income in respect of the “cashless exercise” of AOC Options and AOC Warrants contemplated in this Section 2.5, and AOC shall: (i) make an election pursuant to subsection 110(1.1) of the Tax Act in respect of the “cashless exercise” of the AOC Options and AOC Warrants; (ii) provide evidence in writing of such election to holders of AOC Options and AOC Warrants, and (iii) make the appropriate notation on the T4 slips issued to such holders, or in such other manner as may be prescribed under the Tax Act; it being understood that holders of AOC Options and AOC Warrants shall be entitled to claim any deductions available to such persons pursuant to the Tax Act in respect of the calculation of any income or benefit arising from the “cashless surrender” of the AOC Options and AOC Warrants.

2.6 AOC Employees

The Parties acknowledge that the employment of all officers and employees of AOC shall be terminated at the Effective Time and that certain officers and employees of AOC shall be entitled to receive the AOC Termination Payments. The AOC Termination Payments, less all withholding Taxes, shall be paid by AOC at the Effective Time or as soon as practicable thereafter concurrent with, and subject to, the execution of a full and final release (from those receiving severance payments) from the payee to AOC in such form as is acceptable to Surge and AOC, acting reasonably. AOC shall use commercially reasonable efforts to obtain an executed copy of such full and final release from every such officer and employee prior to the Effective Time.

2.7 Articles of Arrangement and Effective Date

(a) Surge shall file the Articles of Arrangement with the Registrar as soon as practicable and, in any event, within two Business Days of the satisfaction or, where not prohibited, the waiver by the applicable Party in whose favour the condition is, of the conditions set out in Article 5 (excluding conditions, that by their terms, cannot be satisfied until the Effective Date, but subject to the satisfaction or, where not prohibited, the waiver by the applicable Party in whose favour the condition is, of those conditions at the Effective Date), unless another time or date is agreed to in writing by the Parties.
(b) The Arrangement shall become effective at the Effective Time on the Effective Date. The Parties shall use their reasonable commercial efforts to cause the Effective Date to occur on or about August 18, 2021 or as soon thereafter as reasonably practicable and, in any event, by the Outside Date.

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(c) The closing of the Arrangement will take place at the offices of legal counsel to Surge, or at such other location as may be agreed by the Parties.

2.8 Directors’ and Officers’ Insurance

Prior to the Effective Time, AOC shall purchase customary “tail” policies of directors’ and officers’ liability insurance providing protection no less favourable in the aggregate to the protection provided by the policies maintained by AOC which are in effect immediately prior to the Effective Date and providing protection in respect of claims arising from facts or events which occurred on or prior to the Effective Date and Surge will, or will cause AOC to, maintain such tail policies in effect without any reduction in scope or coverage for six years from the Effective Date. The cost of such insurance shall be included in the calculation of the AOC Transaction Costs.

2.9 Recommendation of AOC Board

The AOC Board has unanimously:

(a) determined that the Arrangement is in the best interests of AOC;
(b) determined that the Arrangement is fair to the AOC Shareholders;
(c) approved the Arrangement and the entering into of this Agreement; and
(d) resolved to recommend that AOC Shareholders vote in favour of the AOC Arrangement Resolution.

Notice of such approvals, determinations and resolution shall, subject to the terms hereof, be included in the Information Circular.

2.10 Recommendation of Surge Board

The Surge Board has unanimously:

(a) determined that the Arrangement is in the best interests of Surge;
(b) approved the Arrangement and the entering into of this Agreement; and
(c) resolved to recommend that Surge Shareholders vote in favour of the Surge Issuance Resolution.

Notice of such approvals, determinations and resolution shall, subject to the terms hereof, be included in the Information Circular.

2.11 Dissenting Shareholders

Registered AOC Shareholders entitled to vote at the AOC Meeting may exercise Dissent Rights with respect to their AOC Shares in connection with the Arrangement pursuant to and in the manner set forth in the Plan of Arrangement and the Interim Order.

2.12 Tax Withholdings

Surge and AOC shall be entitled to deduct and withhold (or cause to be deducted and withheld) from any Consideration otherwise payable or deliverable to any holder of AOC Shares or, as to AOC Shares held by a Dissenting Shareholder, the fair value payable or deliverable in respect of the Dissenting Shareholder’s AOC Shares, in the manner contemplated by the Plan of Arrangement.

ARTICLE 3 COVENANTS

3.1 Covenants of AOC

AOC covenants and agrees that, from the date of this Agreement until the earlier of the Effective Date or termination of this Agreement in accordance with Article 8, except with the prior written consent of Surge (such consent not to be unreasonably withheld, conditioned or delayed), except as otherwise expressly permitted or specifically contemplated by this Agreement (including, without limitation, the Plan of Arrangement) or required by Applicable Laws:

(a) subject to Section 3.1(c), AOC’s business shall be conducted only in the usual and ordinary course of business consistent with past practice (for greater certainty, where it is an operator of any property, it shall operate and maintain such property in a proper and prudent manner in accordance with good industry practice and the agreements governing the ownership and operation of such property) and keep Surge apprised of all material developments relating thereto; with it being acknowledged and agreed by Surge that such covenant is subject to: (i) AOC’s compliance with Applicable Laws related to the COVID-19 pandemic; and (ii) actions taken as a result of such pandemic’s continuing effect on working restrictions and the local, national and global economy (including any work stoppages or operational stoppages necessary to safeguard life or property); provided that any such action taken outside of the ordinary

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course of business or inconsistent with past practice as a result of such pandemic’s continuing effect on working restrictions and the local, national and global economy (including any work stoppages or operational stoppages necessary to safeguard life or property) will be commercially reasonable and, to the extent applicable, not disproportionate compared to actions taken by companies similar to AOC;

(b)

AOC shall not, directly or indirectly do or permit to occur any of the following: (i) amend its constating documents; (ii) amend the AOC Option Plan or the terms of any outstanding AOC Options; (iii) amend the terms of any outstanding AOC Warrants; (iv) declare, set aside or pay any dividend, other distribution or payment (whether in cash, shares or property) in respect of its outstanding shares; (v) issue (other than on exercise of currently outstanding AOC Options or AOC Warrants), grant, sell or pledge or agree to issue, grant, sell or pledge any of its shares, or securities convertible into or exchangeable or exercisable for, or otherwise evidencing a right to acquire, any of its shares; (vi) issue, grant or sell any AOC Options or AOC Warrants; (vii) redeem, purchase or otherwise acquire any of its outstanding shares or other securities, except as permitted in accordance with the terms hereunder; (viii) split, combine or reclassify any of its shares; (ix) adopt a plan of liquidation or resolutions providing for its liquidation, dissolution, merger, consolidation, combination or reorganization or incorporate a subsidiary; (x) pursue or announce any acquisition of all or substantially all the assets or securities of any other Person or make any material change to its business, capital or affairs; (xi) reduce its stated capital; (xii) conduct any activity or operations that would otherwise be detrimental to the completion of the Arrangement; (xiii) pay, discharge or satisfy any material claims, liabilities or obligations other than in the ordinary course of business consistent with past practice; (xiv) encumber, surrender, release or abandon the whole or any part of the AOC Assets, other than production in the ordinary course; (xv) hire or terminate any employees, except in accordance with this Agreement; (xvi) take any action, refrain from taking any action, permit any action to be taken or not taken, inconsistent with this Agreement, which might directly or indirectly interfere or affect the consummation of the Arrangement in any material respect; or (xvii) enter into or modify any contract, agreement, commitment or arrangement with respect to any of the foregoing;

(c) other than as expressly set forth in the AOC Budget, AOC shall not, directly or indirectly: (i) sell, pledge, dispose of or encumber any AOC Assets having an individual value in excess of $50,000, other than in the ordinary course of business; (ii) expend or commit to expend any amount with respect to any capital expenditures having more than an individual value of $50,000 or an aggregate value in excess of $100,000; (iii) expend or commit to expend any amounts with respect to any operating expenses other than in the ordinary course of business or pursuant to the Arrangement and other transactions contemplated by this Agreement; (iv) acquire or agree to acquire (by merger, amalgamation, consolidation or acquisition of shares or assets) any corporation, partnership or other business organization or division thereof which is not a subsidiary or affiliate of AOC, or make any investment therein either by purchase of shares or securities, contributions of capital or property transfer; (v) acquire any assets with an acquisition cost individually exceeding $50,000 or in the aggregate exceeding $100,000; (vi) incur any indebtedness for borrowed money under the AOC Credit Facilities, or any other material liability or obligation or issue any debt securities or assume, guarantee, endorse or otherwise become responsible for, the obligations of any other individual or entity, or make any loans or advances, other than in respect of fees payable to legal, financial and other advisors which are included in the AOC Transaction Costs; (vii) authorize, recommend or propose any release or relinquishment or any material contract right; (viii) waive, release, grant or transfer any material rights of value or modify or change in any material respect any existing material license, lease, contract, production sharing agreement, government land concession or other material document; (ix) except as contemplated in this Agreement, to restructure, unwind, terminate or enter into any hedges, swaps or other financial instruments or like transactions; or (x) authorize or propose any of the foregoing, or enter into or modify any Contract, agreement, commitment or arrangement to do any of the foregoing;

(d) other than the AOC Termination Payments, AOC shall not make any payment to any director, officer, employee or consultant outside of their ordinary and usual compensation for services provided or reasonable expenses reimbursement;
(e) AOC shall not adopt or amend or make any contribution to any bonus, employee benefit plan, profit sharing, deferred compensation, insurance, incentive compensation, other compensation or other similar plan, agreement, stock purchase plan, fund or arrangement for the benefit of employees (including the AOC Option Plan), except as is necessary to comply with Applicable Law or as disclosed in the AOC Disclosure Letter;
(f) except as required by Applicable Laws or as is disclosed in the AOC Disclosure Letter, AOC shall not: (i) grant any officer, director, employee or consultant an increase in compensation in any form; (ii) grant any general salary increase; (iii) take any action with respect to the amendment of any severance or termination pay policies or arrangements for any directors, officers, employees or consultants; nor (iv) advance or forgive any loan to any officer, director or any other party not at arm’s length and shall cause any loan to any officer, director or any other party not at arm’s length to be paid in full by AOC prior to the Effective Time;
(g) AOC shall use its reasonable commercial efforts to cause its current insurance (or re-insurance) policies not to be cancelled or terminated or any of the coverage thereunder to lapse, unless simultaneously with such termination, cancellation or lapse, replacement policies underwritten by insurance or re-insurance companies of nationally recognized standing providing coverage equal to or greater than the coverage under the cancelled, terminated or lapsed policies for substantially similar premiums are in full force and effect and shall pay all premiums in respect of such insurance policies that become due prior to the Effective Date;
(h) AOC shall not pay the holders of AOC Options or AOC Warrants any amount of consideration therefor;
(i) AOC shall not take any action that would render, or may reasonably be expected to render, any representation or warranty made by it in this Agreement untrue in any material respect at any time prior to completion of the Arrangement or termination of this Agreement, whichever first occurs;
(j) AOC shall promptly notify Surge in writing of any Material Adverse Change in respect of AOC and of any change in any representation or warranty provided by AOC in this Agreement which change is or may be of such a nature to render any

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representation or warranty misleading or untrue in any material respect and AOC shall in good faith discuss with Surge any change in circumstances (actual, or to the knowledge of AOC, anticipated or contemplated) which is of such a nature that there may be a reasonable question as to whether notice needs to be given to Surge pursuant to this provision;

(k) AOC shall ensure that it has available funds to permit the payment of the amount which may be required by Section 6.2 having regard to its other Liabilities and obligations, and shall take all such actions as may be necessary to ensure that it maintains such availability to ensure that it is able to pay such amount when required;
(l) AOC shall use its reasonable commercial efforts to satisfy or cause satisfaction of the conditions set forth in Sections 5.1 and 5.3 as soon as reasonably possible to the extent that the satisfaction of the same is within the control of AOC;
(m) AOC shall provide notice to Surge of the AOC Meeting and allow Surge’s Representatives to attend such meeting;
(n) AOC shall ensure that the Information Circular includes: (i) a copy of the AOC Fairness Opinion; (ii) any financial statements that are required to be included therein in accordance with Applicable Laws; and (iii) the unanimous determinations and recommendations of the AOC Board as set forth in Section 2.9, and otherwise that the AOC Information includes such other information as is required under Applicable Laws to be included in the Information Circular in respect of AOC and the AOC Arrangement Resolution;
(o) AOC shall indemnify and save harmless Surge and the directors, officers and agents of Surge from and against any and all liabilities, claims, demands, losses, costs, damages and expenses (excluding any loss of profits or consequential damages) to which Surge, or any director, officer or agent thereof may be subject or which Surge, or any director, officer or agent thereof may suffer, whether under the provisions of any statute or otherwise, in any way caused by, or arising, directly or indirectly, from or in consequence of:
(i) any misrepresentation or alleged misrepresentation in the AOC Information included in the Information Circular or in any material filed by or on behalf of AOC in compliance or intended compliance with any Applicable Laws;
(ii) any order made or any inquiry, investigation or proceeding by any securities commission or other competent authority based upon any untrue statement or omission or alleged untrue statement or omission of a material fact or any misrepresentation or any alleged misrepresentation in the AOC Information included in the Information Circular or in any material filed by or on behalf of AOC in compliance or intended compliance with Applicable Laws, which prevents or restricts the trading in the AOC Shares; and
(iii) AOC not complying with any requirement of Applicable Laws in connection with the transactions contemplated in this Agreement,

except that AOC shall not be liable in any such case to the extent that any such liabilities, claims, demands, losses, costs, damages and expenses arise out of or are based upon any misrepresentation or alleged misrepresentation of a material fact based on the Surge Information included in the Information Circular or the negligence of Surge;

(p) AOC shall use its reasonable commercial efforts to preserve intact its business organizations and goodwill and to maintain satisfactory relationships with suppliers, distributors, customers and others having business relationships with it;
(q) except for proxies and other non-substantive communications with securityholders, AOC shall furnish promptly to Surge and Surge’s counsel, a copy of each notice, report, schedule or other document delivered, filed or received by AOC from securityholders or regulatory agencies in connection with: (i) the Arrangement; (ii) the AOC Meeting; (iii) any filings under Applicable Laws in connection with the transactions contemplated hereby; and (iv) any dealings with regulatory agencies or other Governmental Authorities in connection with the transactions contemplated hereby;
(r) AOC shall provide to Surge reports on its operations and affairs as may be reasonably requested from time to time by Surge; (s) AOC shall use reasonable commercial efforts to keep Surge informed as to the decisions required with respect to the methods of exploring, operating and producing from its business, in the opinion of AOC, acting reasonably;
(t) AOC shall make all necessary filings and applications under Applicable Laws required to be made on the part of AOC in connection with the transactions contemplated herein and shall take all reasonable action necessary to be in compliance with such Applicable Laws;
(u) AOC shall, up to and including the Effective Date, continue to withhold from each payment to be made to and each benefit to be conferred upon any of its present or former employees (which includes directors and officers) and to all Persons, including, without limitation, all Persons who are non-residents of Canada for the purposes of the Tax Act all amounts that are required to be withheld by any Applicable Laws and AOC shall remit such withheld amounts to the proper Governmental Authority within the times prescribed by such Applicable Laws;
(v) AOC shall:
(i) duly and on a timely basis file all Tax Returns required to be filed by it on or after the date hereof pursuant to Applicable Laws relating to Taxes, in a manner consistent with past practice and all such Tax Returns will be true, complete and correct in all material respects;
(ii) fully and timely pay all Taxes due and payable;
(iii) promptly notify Surge in writing of any audits or investigations with respect to Taxes of AOC;
(iv) not make or rescind any express or deemed election relating to Taxes, or file any amended Tax Returns, except as required by Applicable Law;

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(v) not make a request for a Tax ruling or enter into any agreement relating to Taxes with any Governmental Authority;
(vi) other than as set forth in the AOC Disclosure Letter, not, directly or indirectly, materially reduce the amount or amend the characterization of any of its individual categories of its Tax Pools, except as required by Applicable Law;
(vii) not change in any material respect any of its methods of reporting income, deductions or accounting for Tax purposes from those employed in preparation of its Tax Returns for a taxation year ending prior to the date hereof, except as required by Applicable Law;
(viii) not settle any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes except as reflected or reserved against in the AOC Financial Statements; and
(ix) properly reserve (and reflect such reserves in its books and records and financial statements, including the AOC Financial Statements) for all Taxes accruing in respect of AOC which are not due or payable prior to the Effective Date in a manner consistent with past practice and in accordance with the provisions of Applicable Laws relating to Taxes; and
(w) AOC shall not amend, supplement or modify any AOC Financial Advisory Agreement, and other than the AOC Financial Advisors, neither AOC nor the AOC Board shall retain any financial advisor, broker, agent or finder, or pay or agree to pay or have Surge pay any financial advisor, broker, agent or finder on account of this Agreement or the Arrangement, any transaction contemplated hereby or any transaction presently ongoing or contemplated without the consent of Surge (which consent will not be unreasonably withheld or delayed).
(x) AOC shall cause its registrar and transfer agent to deliver to Surge, prior to the Effective Time, a final register of shareholders (the “ AOC Closing Share Register ”) of AOC, which register shall include the name of each AOC Shareholder and the number of AOC Shares held by each immediately prior to the Effective Time.

3.2 Covenants of Surge

Surge covenants and agrees that, from the date of this Agreement until the earlier of the Effective Date or termination of this Agreement in accordance with Article 8, except with the prior written consent of AOC (such consent not to be unreasonably withheld, conditioned or delayed), except as otherwise expressly permitted or specifically contemplated by this Agreement (including the Plan of Arrangement and the Surge Disclosure Letter) or required by Applicable Laws:

(a) Surge and the Surge Subsidiary shall conduct their business in the usual and ordinary course, consistent with past practice and shall not do any of the following:
(i) conduct any activity or operations that would otherwise be detrimental to the Arrangement; or
(ii) take any action, refrain from taking any action, permit any action to be taken or not taken, inconsistent with this Agreement, which might directly or indirectly interfere with or adversely affect the consummation of the Arrangement in any material respect;

it being acknowledged and agreed by AOC that such covenant is subject to: (i) Surge’s compliance with Applicable Laws related to the COVID-19 pandemic; and (ii) actions taken as a result of such pandemic’s continuing effect on working restrictions and the local, national and global economy (including any work stoppages or operational stoppages necessary to safeguard life or property); provided that any such action taken outside of the ordinary course of business or inconsistent with past practice as a result of such pandemic’s continuing effect on working restrictions and the local, national and global economy (including any work stoppages or operational stoppages necessary to safeguard life or property) will be commercially reasonable and, to the extent applicable, not disproportionate compared to actions taken by companies similar to Surge;

(b) Surge shall not directly or indirectly do or permit to occur any of the following: (i) amend its constating documents in a manner materially adverse to the Consideration; (ii) declare, set aside or pay any dividend, distribution or payment (whether in cash, shares or property) in respect of its outstanding Surge Shares except in an amount consistent with Surge’s current dividend policy; (iii) adopt a plan of liquidation or resolutions providing for the liquidation, dissolution, consolidation or reorganization of Surge; (iv) split, combine or reclassify any of its Surge Shares unless the Arrangement is amended upon the same terms and conditions; (v) sell dispose of, transfer, convey, encumber, surrender, release or abandon the whole or any part of its material assets, other than production in the ordinary course; or (vi) enter into or modify any Contract, agreement, commitment or arrangement with respect to any of the foregoing;
(c) Surge, officers of Surge and the Surge Board and senior management shall take all reasonable actions to solicit proxies to be voted at the Surge Meeting in favour of the Surge Issuance Resolution;
(d) Surge shall provide notice to AOC of the Surge Meeting and allow AOC’s Representatives to attend such meeting;
(e) Surge shall cooperate with AOC in the preparation of the Information Circular and provide AOC, in a timely and expeditious manner, all information as may be reasonably requested by AOC in respect of Surge, including the Surge Information, for inclusion in the Information Circular and any amendments and supplements thereto, in each case complying in all material respect with all Applicable Laws;
(f) Surge shall ensure that the Information Circular includes the unanimous determinations and recommendations of the Surge Board of Directors as set forth in Section 2.10 and otherwise that the Surge Information includes such other information as is required under Applicable Laws to be included in the Information Circular in respect of Surge and the Surge Issuance Resolution;

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(g) except for proxies and other non-substantive communications with securityholders, Surge shall furnish promptly to AOC and AOC’s counsel, a copy of each notice, report, schedule or other document delivered, filed or received by Surge from securityholders or regulatory agencies in connection with: (i) the Arrangement; (ii) the Surge Meeting; (iii) any filings under Applicable Laws in connection with the transactions contemplated hereby; and (iv) any dealings with regulatory agencies or other Governmental Authorities in connection with the transactions contemplated hereby;
(h) Subject to all Applicable Law, Surge shall provide to AOC reports on its operations and affairs as may be reasonably requested from time to time by AOC;
(i) Surge shall ensure that AOC and its counsel shall be given a reasonable opportunity to review and comment on drafts of the Surge Information to be included in the Information Circular and any other information prepared by Surge and its counsel for inclusion in the Information Circular and other documents related thereto, and reasonable consideration shall be given to any comments made by AOC and its counsel, provided that all Surge Information included in the Information Circular shall be in form and content satisfactory to Surge, acting reasonably;
(j) Surge shall not take any action that would render, or may reasonably be expected to render, any representation or warranty made by it in this Agreement untrue in any material respect at any time prior to the completion of the Arrangement or termination of this Agreement, whichever first occurs;
(k) Surge shall promptly notify AOC in writing of any Material Adverse Change in respect of Surge and of any change in any representation or warranty provided by Surge in this Agreement which change is or may be of such a nature to render any representation or warranty misleading or untrue in any material respect and Surge shall in good faith discuss with AOC any change in circumstances (actual, anticipated, contemplated, or to the knowledge of Surge threatened) which is of such a nature that there may be a reasonable question as to whether notice need to be given to AOC pursuant to this provision;
(l) Surge shall use its reasonable commercial efforts to obtain any third party consents required for the transactions contemplated hereby and provide the same to AOC on or prior to the Effective Date;
(m) Surge shall ensure that it has available funds to permit the payment of the amount which may be required by Section 6.1 having regard to its other Liabilities and obligations, and shall take all such actions as may be necessary to ensure that it maintains such availability to ensure that it is able to pay such amount when required;
(n) Surge shall use its reasonable commercial efforts to satisfy or cause satisfaction of the conditions set forth in Sections 5.1 and 5.2 as soon as reasonably possible to the extent that the satisfaction of the same is within the control of Surge;
(o) Surge shall assist AOC in securing all consents of third parties who are required to provide consent for the inclusion of reference to their names on the reports in the Information Circular by virtue of a document incorporated by reference in regards to Surge in the Information Circular, or otherwise;
(p) Surge shall indemnify and save harmless AOC and the directors, officers and agents of AOC from and against any and all liabilities, claims, demands, losses, costs, damages and expenses (excluding any loss of profits or consequential damages) to which AOC or any director, officer or agent thereof may be subject or which AOC or any director, officer or agent thereof may suffer, whether under the provisions of any statute or otherwise, in any way caused by, or arising, directly or indirectly, from or in consequence of:
(i) any misrepresentation or alleged misrepresentation in the Surge Information included in the Information Circular or in the Surge Public Record or in any material filed in compliance or intended compliance with any Applicable Laws;
(ii) any order made or any inquiry, investigation or proceeding by any securities commission or other competent authority based upon any untrue statement or omission or alleged untrue statement or omission of a material fact or any misrepresentation or any alleged misrepresentation in the Surge Information included in the Information Circular or in the Surge Public Record or in any material filed by or on behalf of Surge in compliance or intended compliance with Applicable Laws, which prevents or restricts the trading in the Surge Shares; and
(iii) Surge not complying with any requirement of Applicable Laws in connection with the transactions contemplated in this Agreement,

except that Surge shall not be liable in any such case to the extent that any such liabilities, claims, demands, losses, costs, damages and expenses arise out of or are based upon any misrepresentation or alleged misrepresentation of a material fact based on the information included in the Information Circular (other than the Surge Information) or the negligence of AOC;

(q) except for non-substantive communications, Surge shall furnish promptly to AOC or AOC’s counsel, a copy of each notice, report, schedule or other document delivered, filed or received by Surge in connection with: (i) the Arrangement; (ii) the Surge Meeting; (iii) any filings under Applicable Laws in connection with the transactions contemplated hereby; and (iv) any dealings with the TSX, regulatory agencies or other Governmental Authorities in connection with the transactions contemplated hereby;
(r) Surge shall make all necessary filings and applications under Applicable Laws required to be made on the part of Surge in connection with the transactions contemplated herein and shall take all reasonable commercial action necessary to be in compliance with such Applicable Laws;
(s) Surge shall make application to the TSX and use its reasonable commercial efforts to obtain the approval of the TSX for the listing on the Effective Date of the Surge Shares to be issued pursuant to the Arrangement and the approval of the Surge Shareholders for the Surge Issuance Resolution;

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(t) Surge shall take all necessary actions to give effect to the transactions contemplated by this Agreement and the Arrangement; provided, however, that nothing in this Section 3.2(t) or elsewhere in this Agreement shall require, or be construed to require Surge to: (i) (A) sell, lease, license, transfer, dispose of, divest or otherwise encumber, or to hold separate pending any such action; or (B) propose, negotiate, offer to effect or consent, commit or agree to any sale, divestiture, lease, licensing, transfer, disposal, divestment or other Encumbrance of, or to hold separate any assets, licenses, operations, rights, product lines, businesses or interest of Surge, AOC or any of their respective subsidiaries or affiliates; or (ii) take or agree to take any other action, or agree or consent to any limitations or restrictions on freedom of actions with respect to, or its ability to own, retain or make changes in, any assets, licenses, operations, rights, product lines, businesses or interests of Surge, AOC or any of their respective subsidiaries or affiliates; and
(u) prior to the Effective Time, Surge shall issue and deliver to the Depositary an irrevocable treasury order authorizing the Depositary, as the registrar and transfer agent for the Surge Shares, to issue in a book based register the aggregate number of Surge Shares representing the Consideration payable to the former holders of AOC Shares pursuant to the provisions of the Arrangement. Following the Effective Time, the Depositary shall be considered to hold such funds and Surge Shares for the sole benefit of the AOC Shareholders.

3.3 Mutual Covenants Regarding the Arrangement

From the date of this Agreement until the earlier of the Effective Date or the termination of this Agreement, each of AOC and Surge will use its reasonable commercial efforts to: (i) satisfy (or cause the satisfaction of) the conditions precedent to its obligations hereunder; (ii) not take, or cause to be taken, any action or cause anything to be done that would cause such obligations not to be fulfilled in a timely manner; and (iii) take, or cause to be taken, all other action and to do, or cause to be done, all other things necessary, proper or advisable under Applicable Laws to complete the Arrangement, including using reasonable commercial efforts:

(a) to obtain all necessary waivers, consents and approvals required to be obtained by it from other parties to loan agreements, leases and other Contracts;
(b) to obtain all necessary consents, assignments, waivers and amendments to or terminations of any instruments and take such measures as may be appropriate to fulfill its obligations hereunder and to carry out the transactions contemplated hereby;
(c) to effect all necessary registrations and filings and submission of information requested by Governmental Authorities required to be effected by it in connection with the Arrangement, and each of Surge and AOC shall use its reasonable commercial efforts to cooperate with the other in connection with the performance by the Other Party of its obligations under this Section 3.3 including continuing to provide reasonable access to information and to maintain ongoing communications as between Representatives of Surge and AOC, subject in all cases to the Confidentiality Agreements;
(d) in connection with the Competition Act Approval:
(i) Surge and AOC shall as promptly as reasonably practicable jointly file with the Competition Bureau, a request for an advance ruling certificate under Section 102 of the Competition Act or, in the alternative, a No-Action Letter (the “ ARC Request ”) and the Parties shall supply the Commissioner of Competition at the Competition Bureau with such additional information as the Commissioner of Competition may reasonably request. Surge shall have the primary responsibility for the preparation and submission of the ARC Request. Surge and AOC shall respond as promptly as reasonably practicable under the circumstances to any reasonable inquiries received from the Competition Bureau for additional information or documentation and to all reasonable inquiries and requests received from the Competition Bureau;
(ii) if deemed appropriate by either of the Parties, the Parties shall as promptly as reasonably practicable each file a pre-merger notification pursuant to Section 114 of the Competition Act ;
(iii) the Parties shall coordinate and cooperate in exchanging information and supplying assistance that is reasonably requested in connection with Section 3.3(d)(i) and Section 3.3(d)(ii) above, including providing each other with advance copies and reasonable opportunities to comment on all filings made to the Competition Bureau and any additional or supplementary information supplied pursuant thereto in respect of obtaining the Competition Act Approval;
(iv) the Parties will inform each other of any substantive communications, to the extent related to this Agreement or the transactions contemplated hereby, with the staff of the Competition Bureau or the Commissioner of Competition and will permit the Other Party to participate in (to the extent possible) and have reasonable opportunity to review and comment on such communications (including any submissions or filings) with the Competition Bureau or the Commissioner of Competition;
(v) Surge and AOC will promptly, upon receipt thereof, provide each other with copies of all notices and substantive correspondence, to the extent related to this Agreement or the transactions contemplated hereby, received from the staff of the Competition Bureau and the Commissioner of Competition;
(vi) submissions, filings or other written communications made by a Party in furtherance of Competition Act Approval may be redacted as necessary before sharing with the Other Party to address reasonable solicitor-client or other privilege or confidentiality concerns provided that external legal counsel to Surge or AOC shall receive non-redacted versions of drafts or final submissions, filings or other written communications in respect of privileged or confidential matters on the basis that the redacted information will not be shared with their respective clients;

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(vii) notwithstanding any other provision herein, in no event will Surge be required hereunder or otherwise to agree to any hold separate, divestiture or other order, decree or restriction on the businesses of Surge or AOC or any other business, the conduct thereof or future transactions; and
(viii) the Parties shall equally split all filing fees payable in connection with any filing or application made in respect of the Competition Act;

(e) reasonably cooperate with the Other Party and its tax advisors in structuring the Arrangement in a tax effective manner, and assist the Other Party and its tax advisors in making such investigations and inquiries with respect to such Party in that regard, as the Other Party and its tax advisors shall consider necessary, acting reasonably, provided that such Party shall not be obligated to consent or agree to any structuring that has the effect of reducing the consideration to be received under the Arrangement by any of its securityholders; and

(f) to obtain resignations and mutual releases in a form acceptable to Surge, acting reasonably, on or prior to the Effective Date from each person who is a director or officer of AOC.

3.4 Covenants Regarding Non-Solicitation

(a) AOC shall immediately cease and cause to be terminated all existing discussions and negotiations (including, without limitation, through any officers, directors, employees, representatives, agents or advisors of AOC or other parties on its behalf) (“ Representatives ”), with any parties (other than pursuant to this Agreement) with respect to any proposal that constitutes, or may reasonably be expected to constitute or lead to an Acquisition Proposal. AOC shall not amend, modify, waive, release or otherwise forebear in the enforcement of, and shall use all commercially reasonable efforts to enforce, any confidentiality, non-solicitation or standstill or similar agreements or provisions to which it and any third parties are parties. AOC shall discontinue access to any of its confidential information (and not establish or allow access to any of its confidential information, or any data room, virtual or otherwise) and shall as soon as possible request, to the extent that it is entitled to do so, and exercise all rights it has to require, the return or destruction of all confidential information provided to any third parties who have entered into a confidentiality or similar agreement with AOC relating to an Acquisition Proposal and shall request in accordance with the terms of such confidentiality or similar agreement the destruction of all material including or incorporating or otherwise reflecting any material confidential information regarding it. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in this Section 3.4(a) by AOC or its officers, directors, employees, advisors, Representatives and agents shall be deemed to be a breach of this Section 3.4(a) by AOC.

(b) AOC shall not, directly or indirectly, do or authorize or permit any of its officers, directors or employees or any financial advisor, expert or other Representative retained by it to do, any of the following:

(i) solicit, assist, initiate, encourage or in any way knowingly facilitate (including by way of furnishing information, or entering into any form of written or oral agreement, arrangement or understanding), the making of any proposal or offer that constitutes or may constitute, or may reasonably be expected to lead to, an Acquisition Proposal or inquiries, proposals or offers regarding an Acquisition Proposal;
(ii) enter into or participate in any discussions or negotiations regarding an Acquisition Proposal, or furnish or provide access to any other Person any information, including with respect to its businesses, the AOC Assets, Liabilities, operations, prospects or condition (financial or otherwise), in connection with an Acquisition Proposal or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt of any other Person to do or seek to do any of the foregoing;
(iii) waive, or otherwise forbear in the enforcement of, or enter into or participate in any discussions, negotiations or agreements to waive or otherwise forbear in respect of, any rights or other benefits under confidential information agreements relating to an Acquisition Proposal, including, without limitation, any “standstill” or similar provisions thereunder (it being acknowledged and agreed that the automatic termination of any standstill provision of any such agreement as a result of entering into and the announcement of this Agreement by the Parties pursuant to the express terms of any such agreement, shall not be in violation of this Section 3.4(b));
(iv) accept, recommend, approve, agree to or endorse, or propose publicly to accept, recommend, approve, agree to or endorse, any Acquisition Proposal or agreement, understanding or arrangement in relation thereto; or
(v) withdraw or modify, or propose to withdraw or modify, in any manner adverse to Surge, the approvals, determinations and recommendations of the AOC Board as set forth in Section 2.9,

provided, however, that notwithstanding any other provision hereof, AOC and its respective officers, directors, advisors and other Representatives may, prior to obtaining the approval of the AOC Shareholders of the AOC Arrangement Resolution at the AOC Meeting:

(vi) enter into or participate in any discussions or negotiations with a third party who (without any solicitation, initiation or encouragement, directly or indirectly, after the date hereof, by it or any of its officers, directors, Representatives, agents or advisors of AOC or other Representative retained by it) seeks to initiate such discussions or negotiations with AOC, provided that such discussions or negotiations did not result from or are not connected to a breach of this Section 3.4, and subject to execution of a confidentiality and standstill agreement containing customary standstill provisions (provided that such confidentiality agreement shall provide for disclosure thereof (along with all information provided thereunder) to Surge as set

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forth below), AOC may furnish to such third party information concerning it and its business and the AOC Assets, in each case if, and only to the extent that:

(A) the third party has first made, after the date hereof, an unsolicited written bona fide Acquisition Proposal in respect of which the AOC Board determines in good faith, after consultation with its external legal and independent financial advisors, constitutes, or would reasonably be expected to constitute or lead to, a Superior Proposal; and
(B) prior to furnishing such information to or entering into or participating in any such discussions or negotiations with such third party, it provides prompt notice to Surge to the effect that it is furnishing information to or entering into or participating in discussions or negotiations with such Person together with a copy of the confidentiality and standstill agreement referenced above and, if not previously provided to Surge, copies of all information provided to such third party concurrently with the provision of such information to such third party, and provided further that it shall notify Surge orally and in writing of any inquiries, offers or proposals relating to or constituting an Acquisition Proposal (or any amendment thereto), which written notice shall include, without limitation, a copy of any such proposal, the identity of the Person making it, if not previously provided to Surge, copies of all information provided to such party, any material correspondence with respect thereto, and all other information reasonably requested by Surge, within 24 hours of the receipt thereof, and shall keep Surge promptly and fully informed of the status and details of any such inquiry, offer or proposal and answer the respective questions of Surge with respect thereto on a timely basis; and
(vii) accept, recommend, approve or enter into an agreement to implement a Superior Proposal from a third party, but only if prior to such acceptance, recommendation, approval or implementation:
(A) the AOC Board shall have concluded in good faith, after considering all proposals to adjust the terms and conditions of this Agreement as contemplated by Section 3.4(d) and after receiving the advice of outside counsel as reflected in minutes of the AOC Board that the taking of such action is necessary for such board of directors in the discharge of its fiduciary duties under Applicable Laws; and
(B) AOC shall otherwise have complied with its obligations set forth in this Section 3.4, including without limitation Section 3.4(d), and terminates this Agreement in accordance with Section 8.1(a)(v) and concurrently therewith pays the Surge Termination Fee to Surge.

(c) AOC shall promptly (and in any event within 24 hours of the receipt thereof) notify Surge (at first orally and then in writing) of any Acquisition Proposal (or any amendment thereto) or any request for non-public information relating to it or its business or the AOC Assets. Such notice shall include a copy of any written Acquisition Proposal (and any amendment thereto) which has been received or, if no written Acquisition Proposal has been received, a description of the material terms and conditions of, and the identity of the Person making any inquiry, proposal, offer or request. AOC shall also provide such further and other details of the Acquisition Proposal or any amendment thereto as Surge may reasonably request. AOC shall keep Surge promptly and fully informed of the status, including any change to material terms, of any Acquisition Proposal or any amendment thereto, shall respond promptly to all inquiries by Surge, with respect thereto, and shall provide Surge copies of all material correspondence and other written material sent to or provided to it by any Person in connection with such inquiry, proposal, offer or request or sent or provided by it to any Person in connection with such inquiry, proposal, offer or request.

(d) AOC shall give Surge, orally and in writing, at least three (3) Business Days advance notice of any meeting to be held by the AOC Board to accept, recommend, approve or enter into an agreement to implement a Superior Proposal, which notice shall:
(i) identify the third party making the Superior Proposal;
(ii) provide a true and complete copy of the Superior Proposal, including any financing documents, and any amendments thereto;
(iii) set forth the AOC Board’s reasonable determination of the financial value of the consideration offered by such third party to AOC Shareholders under such Superior Proposal; and
(iv) confirm that the AOC Board has determined that such Acquisition Proposal constitutes a Superior Proposal.

(e)

During the three (3) Business Day period commencing on the delivery of such notice, AOC agrees not to accept, recommend, approve or enter into any agreement to implement such Superior Proposal and not to release the party making the Superior Proposal from any standstill provisions and shall not withdraw, redefine, modify or change its recommendation in respect of the Arrangement. In addition, during such three (3) Business Day period it shall, and shall cause its financial and legal advisors to, negotiate in good faith with Surge and its financial and legal advisors to make such adjustments to the terms and conditions of this Agreement and the Arrangement as would enable it to proceed with the Arrangement as amended rather than the Superior Proposal. In the event Surge submits a binding offer to amend this Agreement and the Arrangement such that the Superior Proposal ceases to be a Superior Proposal and so advises the AOC Board prior to the expiry of such three (3) Business Day period, the AOC Board shall not accept, recommend, approve or enter into any agreement to implement such Superior Proposal, shall not release the party making the Superior Proposal from any standstill provisions and shall not withdraw, redefine, modify or change its recommendation in respect of the Arrangement. Each successive amendment to any Superior Proposal that results in an increase in, or modification of, the consideration (or value of such consideration) to be received by the AOC Shareholders pursuant thereto shall constitute a new Superior Proposal for the purposes hereof and a new three (3) Business Day period shall commence.

(f) AOC shall reaffirm, in a manner acceptable to Surge, acting reasonably, its recommendation of the Arrangement promptly and in any event within five (5) Business Days of any written request to do so by Surge (or, in the event that the AOC Meeting to approve the

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Arrangement is scheduled to occur within such three (3) Business Days, prior to the scheduled date of such meeting) in the event that: (i) any Acquisition Proposal which is publicly announced is determined not to be a Superior Proposal; or (ii) the Parties have entered into an amended agreement pursuant to Section 3.4(e) which results in any Acquisition Proposal not being a Superior Proposal.

(g) Each of AOC and Surge agree that all information that may be provided to Surge by AOC with respect to any Acquisition Proposal pursuant to this Section 3.4 shall be treated as if it were “ Confidential Information ” as that term is defined in the Confidentiality Agreements and shall not be disclosed or used except in accordance with the provisions of the Confidentiality Agreements or in order to enforce its rights under this Agreement in legal proceedings.

(h) AOC shall ensure that its officers, directors, employees, Representatives, agents or advisors retained by it are aware of the provisions of this Section 3.4 and shall be responsible for any breach of this Section 3.4 by any of them.
(i) Nothing in this Agreement shall prevent the AOC Board from complying with Section 2.17 of National Instrument 62-104 – Take Over Bids and Issuer Bids of the Canadian Securities Administrators and similar provisions under Applicable Securities Laws relating to the provision of directors’ circulars in respect of an Acquisition Proposal that is not a Superior Proposal but only following compliance with Section 3.4(c) by AOC.

3.5 Provision of Information; Access

(a) From and after the date hereof, AOC shall provide Surge and its Representatives reasonable access, during normal business hours and at such other time or times as Surge may reasonably request, to its premises (including field offices and sites), books, Contracts, records, data extracts, properties, employees and management personnel and shall furnish promptly to Surge all information concerning its business, properties and personnel as Surge may reasonably request, which information shall remain subject to the Confidentiality Agreements, in order to permit Surge to be in a position to expeditiously and efficiently integrate the business and operations of AOC with those of Surge immediately upon but not prior to the Effective Date. AOC agrees to keep Surge fully apprised in a timely manner of every circumstance, action, occurrence or event occurring or arising after the date hereof that would be relevant and material to a prudent operator of the business and operations of AOC. AOC shall confer with and obtain Surge’s approval (not to be unreasonably withheld or delayed), prior to taking action (other than in emergency situations) with respect to any operational matters involved in its business that are outside or not consistent with the AOC Budget; and, further, each Party acknowledges that certain information may be so sensitive as to require special handling procedures and obligations in addition to those set forth in this Agreement. In such event, the Parties may execute from time to time supplements to this Agreement identifying such information, particularly competitively sensitive information, and the special procedures and obligations relating to the disclosure thereof. The Parties shall use all reasonable efforts to ensure that they take no actions, through the exchange of confidential information or otherwise, in breach of the Competition Act or any other applicable competition laws or regulations of any applicable jurisdictions.
(b) Without limiting the generality of any of the other provisions of this Agreement, AOC shall make available to Surge all land, legal, title documents and related files, geologic maps, well files and well logs, books, papers, financial information and pertinent documents or agreements.
(c) Each of the Parties agrees to:
(i) permit the Other Party’s Representatives full access to its books, records and documents, provided that the disclosing party is satisfied, acting reasonably, that the confidentiality of the subject matter of the disclosure can be maintained in accordance herewith; and
(ii) endeavour to include in the information furnished to the Other Party, or obtained by the other in the course of the aforesaid investigations, all information which would reasonably be considered to be relevant for the purposes of the other’s investigation and not knowingly withhold any information which would make anything contained in the information delivered erroneous or misleading.
(d) The Parties acknowledge and agree that all information provided by one Party to the other pursuant to this Section 3.5 shall remain subject to the provisions of the Confidentiality Agreements.

ARTICLE 4 REPRESENTATIONS AND WARRANTIES

4.1 Representations and Warranties of AOC

AOC represents and warrants to and in favour of Surge and acknowledges that Surge is relying upon such representations and warranties in connection with the matters contemplated by this Agreement and the consummation of the Arrangement:

(a) Organization and Qualification: AOC has been duly incorporated, amalgamated or otherwise formed and is validly subsisting under the Applicable Laws of the Province of Alberta and has the requisite power and authority to own its assets and properties as now owned and to carry on its business as now conducted. AOC is duly registered or authorized to conduct its affairs or do business, as applicable, and is in good standing in each jurisdiction in which the character of its assets and properties, owned, leased, licensed or otherwise held, or the nature of its activities makes such registration or authorization necessary except where the failure to have such standing which, if not in place, would not, individually or in the aggregate, have a Material Adverse Effect on AOC, or significantly

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(b)

impede the ability of AOC to consummate the Arrangement. Copies of the constating documents of AOC have been made available to Surge, together with all amendments to date, and are accurate and complete as of the date hereof and have not been amended or superseded.

Authority Relative to this Agreement: AOC has the requisite corporate power and authority to execute this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and the consummation by AOC of the transactions contemplated by the Arrangement has been duly authorized by the AOC Board and otherwise as required by the terms of the AOC Shareholder Agreement and, subject to the requisite approval of the AOC Shareholders and the obtaining of the Final Order and the Competition Act Approval, no other proceedings on the part of AOC are necessary to authorize this Agreement or the Arrangement. This Agreement has been duly executed and delivered by AOC and constitutes a legal, valid and binding obligation of AOC enforceable against it in accordance with its terms, subject to the qualification that such enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other Applicable Laws of general application relating to or affecting rights of creditors and that equitable remedies, including specific performance, are discretionary and may not be ordered.

No Restrictions: Other than the AOC Shareholder Agreement, there are no rights of first refusal and similar rights restricting transfer of the AOC Shares contained in shareholders, partnership, joint venture or similar agreements or pursuant to existing financing arrangements and there are no outstanding contractual or other obligations of AOC to repurchase, redeem or otherwise acquire any of its securities or with respect to the voting or disposition of any of its outstanding securities.

No Violations: Except as contemplated by this Agreement:
(i) neither the execution and delivery of this Agreement by AOC nor the consummation of the transactions contemplated by the Arrangement nor compliance by AOC with any of the provisions hereof will:
- (A) violate, conflict with, or result in a breach of any provision of, require any consent, approval or notice under, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) or result in a right of termination or acceleration under, or result in the creation of any Encumbrance upon any of the AOC Assets or cause any indebtedness to come due before its stated maturity or cause any credit to cease to be available, under any of the terms, conditions or provisions of: (1) articles or by-laws of AOC; (2) any material Contract to which AOC is a party or to which it, or any of the AOC Assets or AOC Interests, may be subject or by which AOC is bound, including without limitation the AOC Shareholder Agreement; (3) any AOC Office Lease; or (4) any Governmental Authorization;
- (B) subject to compliance with applicable statutes and regulations, including obtaining the Competition Act Approval, violate any Governmental Authorization or any judgment, ruling, order, writ, injunction, determination, award, decree, statute, ordinance, rule or regulation applicable to AOC or any of the AOC Assets; or
- (C) cause the suspension or revocation of any authorization, consent, approval or license currently in effect; and
(ii) other than in connection with or in compliance with the provisions of Applicable Laws in relation to the completion of the Arrangement or which are required to be fulfilled post Arrangement, and except for requisite approvals of the AOC Shareholders and the obtaining of the Final Order and the Competition Act Approval:
- (A) there is no legal impediment to AOC’s consummation of the Arrangement; and
- (B) no filing or registration with, or authorization, consent or approval of, any domestic or foreign public body or authority is required of AOC in connection with the consummation of the Arrangement, except for such filings or registrations which, if not made, or for such authorizations, consents or approvals which, if not received, would not, individually or in the aggregate, have a Material Adverse Effect on AOC, or significantly impede the ability of AOC to consummate the Arrangement.
(f) Litigation: There are no claims, actions, suits, proceedings, investigations, arbitrations, audits, grievances, assessments or reassessments in existence or pending or, to the knowledge of AOC, threatened or for which there is a reasonable basis, affecting or that would reasonably be expected to affect AOC or affecting or that would reasonably be expected to affect any of the AOC Assets at law or in equity or before or by any court or Governmental Authority which claim, action, suit, proceeding, investigation, arbitration, audit, grievance, assessment or reassessment involves a possibility of any judgment against or liability of AOC in excess of $100,000.
(g) Taxes, etc.:
(i) All Tax Returns required to be filed by or on behalf of AOC have been duly filed on a timely basis and all such Tax Returns are true, complete and correct in all material respects. All Taxes or instalments of Taxes shown to be payable on such Tax Returns, or on subsequent assessments with respect thereto, have been paid in full on a timely basis, and no other material Taxes are payable by AOC with respect to items or periods covered by such Tax Returns.
(ii) Except as disclosed in the AOC Disclosure Letter, AOC is not negotiating any proposed assessment or reassessment with any Governmental Authority. AOC is not aware of any contingent liabilities for a material amount of Taxes or any grounds for an assessment or reassessment with respect thereto including, without limitation, aggressive treatment of income, expenses, credits or other claims for deduction under any return or notice. AOC has not received any indication from any Governmental Authority that an audit, assessment or reassessment is proposed in respect of any Taxes, regardless of its merits. AOC has not

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executed or filed with any Governmental Authority any agreement extending the period for the filing of any Tax Returns or for the assessment, reassessment or collection of any Taxes. AOC has not requested, nor entered into any agreement or other arrangement, or executed any waiver providing for, any extension of time within which: (A) to file any Tax Return for which AOC is or may be liable; (B) to file any elections, designations or similar documents or instruments relating to Taxes for which AOC is or may be liable; or (C) any Governmental Authority may assess, reassess or collect Taxes for which AOC is or may be liable.

(iii) AOC has paid or has withheld and remitted to the appropriate Taxing Authority all Taxes on a timely basis and in accordance with Applicable Laws relating to Taxes, including any instalments or prepayments of Taxes, that are due and payable whether or not shown as being due on any Tax Return, or, where payment is not yet due, AOC has established adequate accruals in conformity with GAAP in the AOC Financial Statements for the period covered by such financial statements for any Taxes, including income taxes and related future taxes, if applicable, that have not been paid, whether or not shown as being due on any Tax Return. AOC has made adequate provision or disclosure in its books and records for any Taxes accruing in respect of any period subsequent to the period covered by such financial statements, whether or not shown as being due on any Tax Return. The liability for Taxes has been assessed for all taxation periods up to and including December 31, 2020.
(iv) No material deficiencies exist, or to the knowledge of AOC, have been asserted or threatened by any Governmental Authority with respect to Taxes of AOC that have not yet been settled.
(v) AOC is not, and has not been, a party to any sharing, indemnity or allocation agreement or arrangement relating to Taxes.
(vi) AOC has not claimed in any Tax Return for any taxation year ending on or before the date hereof any reserve (including, without limitation, any reserve under paragraph 20(1)(m) or 20(1)(n) or subparagraph 40(1)(a)(iii) of the Tax Act or any analogous provision under the legislation of any province or other jurisdiction) of any amount which could be included in the income of AOC for any period ending after the date hereof.
(vii) No facts, circumstances or events exist or have existed that have resulted in or may result in the application of any of sections 79, 79.1, 80 to 80.04 of the Tax Act to AOC.
(viii) AOC has not acquired property from a non-arm’s length Person, within the meaning of the Tax Act, for consideration, the value of which is less than the fair market value of the property acquired in circumstances which would subject it to a liability under section 69 or 160 of the Tax Act or under any equivalent provisions of any applicable legislation.
(ix) AOC has complied with all registration, reporting, collection and remittance requirements in respect of all federal and provincial sales tax legislation including, but not limited, to the Excise Tax Act (Canada). AOC has provided to Surge access to all invoices, purchase orders, and all such other documents as are necessary to report any material claim for income tax credits or refunds claimed or to be claimed pursuant to the Excise Tax Act (Canada).
(x) AOC has not breached any flow-through share agreement to which it is a party in respect of the issuance of flow-through shares (as defined in the Tax Act) and AOC does not have any outstanding obligations to incur and/or renounce Canadian exploration expenses or Canadian development expenses (all as defined in the Tax Act) which it covenanted to incur and renounce nor has any Governmental Authority or AOC reduced any amount renounced by AOC pursuant to subsection 66(12.73) of the Tax Act.
(xi) AOC has not made any payment, nor is it obligated to make any payment, and it is not a party to any agreement under which it could be obligated to make any payment that may not be deductible by virtue of section 67 or 78 of the Tax Act or any analogous provincial or similar provision.
(xii) AOC has not had a “loss restriction event” as defined in subsection 251.2(2) of the Tax Act.
(xiii) AOC is and at all times has been prior to the date hereof a “Canadian-controlled private corporation” within the meaning ascribed by the Tax Act.
(xiv) Records or documents that meet the requirements of subsections 247(4)(a) to (c) of the Tax Act have been made and obtained by AOC with respect to all material transactions between AOC and any non-resident Person with whom AOC was not dealing at arm’s length within the meaning of the Tax Act.
(xv) Since its inception, AOC has not, directly or indirectly, declared or paid (or been deemed to have paid pursuant to the Tax Act) any dividend or declared or made any other distribution on any of its shares or securities of any class.
(h)
Investment Canada Act: AOC is not a “non-Canadian” within the meaning of the Investment Canada Act (Canada).
(i) Tax Act Residency: AOC is not a non-resident for the purposes of the Tax Act and is a taxable Canadian corporation within the meaning of subsection 89(1) of the Tax Act.
(j)
Reporting Issuer Status: AOC is not a “reporting issuer” or its equivalent designation in any jurisdiction.
(k) Capitalization: (i) As at the date hereof, AOC is authorized to issue an unlimited number of AOC Shares, an unlimited number of preferred shares and an unlimited of series 1 special voting shares of which AOC has issued and outstanding 68,006,231 AOC Shares, nil preferred shares and nil series 1 special voting shares. In addition, as at the date hereof AOC has issued and outstanding an aggregate of 6,799,000 AOC Options (at an exercise price of $1.00 in respect of 5,500,000 AOC Options and at an exercise price of $1.20 in respect of 1,299,000 AOC Options) and an aggregate of 10,999,998 AOC Warrants (of which 2,200,000 AOC Warrants have

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an exercise price of $1.50 and 2,200,000 AOC Warrants have an exercise price of $1.75 are the only AOC Warrants having an exercise price of less than $2.00 per AOC Share) which if paid in AOC Shares on an in-the-money basis would result in the issuance of up to 4,100,000 AOC Shares. (ii) The AOC Disclosure Letter sets forth the number of outstanding AOC Options and AOC Warrants as of the date hereof and the holders and terms thereof. Except as aforesaid, there are no outstanding shares of AOC or options, warrants, rights or conversion or exchange privileges or other securities entitling anyone to acquire any shares of AOC or any other rights, agreements or commitments of any character whatsoever requiring the issuance, sale or transfer by AOC of any shares of AOC (including AOC Shares) or any securities convertible into, exchangeable or exercisable for, or otherwise evidencing a right to acquire, any shares of AOC. (iii) All outstanding AOC Shares have been duly authorized and validly issued, and are fully paid and non-assessable and are not subject to, nor have they been issued in violation of, any pre-emptive rights.

(l)

Equity Monetization Plans: Except as disclosed in the AOC Disclosure Letter, there are no outstanding stock appreciation rights, phantom equity, profit sharing plan or similar rights, agreements, arrangements or commitments payable to any employee of AOC and which are based upon the revenue, value, income or any other attribute of AOC.

(m) No Orders: No order, ruling or determination having the effect of suspending the sale of, or ceasing the trading of, the AOC Shares or any other securities of AOC have been issued by any Governmental Authority and is continuing in effect and no proceedings for that purpose have been instituted, are pending or, to the knowledge of AOC, are contemplated or threatened under any Applicable Laws or by any Governmental Authority.

(n) Reports: AOC has made available or delivered to Surge true and complete copies of: (i) the AOC Financial Statements; (ii) AOC’s quarterly reports for the quarter ending March 31, 2021; (iii) the AOC Reserves Report; and (iv) all other communications with the AOC Shareholders as a whole since January 1, 2020, provided that such communication was provided to each of the AOC Shareholders in writing. As of their respective dates such documents did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading in any material respect (except with respect to forecasts, projects, and other forward-looking statements, in respect of which no representation or warranty is provided hereunder) and complied in all material respect with all Applicable Laws, such documents (including all exhibits and schedules thereto): (A) did not contain a “misrepresentation” (as defined in Applicable Securities Laws); and (B) complied in all material respects with all applicable requirements of Applicable Laws, including Applicable Securities Laws.

AOC Financial Statements: The AOC Financial Statements were prepared in accordance with GAAP, consistently applied, (except: (i) as otherwise indicated in such financial statements and the notes thereto or, in the case of audited statements, in the related report of AOC’s independent auditors; or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes, are subject to normal year-end adjustments or may be condensed or summary statements), and present fairly in accordance with GAAP, consistently applied, the financial position, results of operations and changes in financial position of AOC on a consolidated basis as of the dates thereof and for the periods indicated therein (subject, in the case of any unaudited interim financial statements, to normal year-end audit adjustments). There has been no material change in AOC accounting policies since January 1, 2021.

Books and Records: The financial books, records and accounts of AOC, in all material respects: (i) have been maintained in accordance with good business practices on a basis consistent with prior years; (ii) are stated in reasonable detail and accurately and fairly reflect the material transactions and dispositions of the properties and assets of AOC; and (iii) accurately and fairly reflect the basis for the AOC Financial Statements. The corporate records and minute books of AOC have been maintained substantially in compliance with Applicable Laws and are complete and accurate in all material respects, and full access thereto has been provided to Surge, other than in relation to Surge and the Arrangement.

(q) Absence of Certain Changes or Events: Except for the Arrangement or any action taken in accordance with this Agreement, since January 1, 2021:

(i) AOC has conducted its business only in the ordinary course of business substantially consistent with past practice;
(ii) no liability or obligation of any nature (whether absolute, accrued, contingent or otherwise) material to AOC, has been incurred other than in the ordinary course of business or other than where such liability or obligation would not have a Material Adverse Effect on AOC;
(iii) there has been no Material Adverse Change in respect of AOC; and
(iv) AOC has not, and to the knowledge of AOC, no director, officer, employee or auditor of AOC has, received or otherwise had or obtained knowledge of any fraud or material complaint, allegation, assertion or claim, whether written or oral, regarding fraud or the accounting or auditing practices, procedures, methodologies or methods of AOC or its internal accounting controls.
(r) Registration, Exemption Orders, Licenses, etc.: To the knowledge of AOC, AOC has obtained and is in compliance with Governmental Authorizations, except where the failure to obtain or be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on AOC. Such Governmental Authorizations are in full force and effect in accordance with their terms, and no event has occurred or circumstance exists that (with or without notice or lapse of time) may constitute or result in a violation of any such Governmental Authorization, except where the violation would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on AOC. No proceedings are pending or, to the knowledge of AOC, threatened, which could result in the revocation or limitation of any Governmental Authorization, and all steps have been taken and filings made on a timely basis with respect to each Governmental Authorization and its renewal, except where the failure to take

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such steps and make such filings would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on AOC.

(s) Compliance with Laws: The operations and business of AOC are and have been carried out in compliance with and not in violation of any Applicable Laws in all material respects, and AOC has not received any notice of any alleged material violation of any such Applicable Laws.

(t) Restrictions on Business Activities: There is no judgment, injunction or order binding upon AOC, and AOC is not subject to any contractual commitment, that has or could reasonably be expected to have the effect of prohibiting, restricting or impairing its business or, individually or in the aggregate, have a Material Adverse Effect on AOC.

(u) Non-Arm’s Length Transactions: Except as disclosed in the AOC Disclosure Letter and except for AOC Options, AOC Warrants or amounts due as normal salaries and bonuses and in reimbursement of ordinary expenses, and for the employment agreements between AOC and employees of AOC, there are no Contracts or other transactions (including with respect to loans or other indebtedness) currently in place between AOC, on the one hand, and (i) any officer, director or employee of AOC, (ii) any holder of record or beneficial owner of 10% or more of the voting securities of AOC, or (iii) any associate or affiliate of any such Person (collectively, “ AOC Related Parties ”). No AOC Related Party, owns, has or is entitled to any royalty, net profits interest, carried interest, participation interest, or any other Encumbrances or claims of any nature whatsoever which are based on production from the AOC Assets of AOC or any revenue or rights attributed thereto.

(v) Title: Although it does not warrant title to any of its assets, AOC does represent and warrant that: (i) it does not have reason to believe that AOC does not have title to or the irrevocable right to produce and sell its petroleum, natural gas and related hydrocarbons (for the purposes of this clause, the foregoing are referred to as the “ AOC Interests ”) and does represent and warrant that, to the knowledge of AOC, the AOC Interests are free and clear of adverse claims created by, through or under AOC, except as related to bank financing or those arising in the ordinary course of business, and, to the knowledge of AOC, AOC holds the AOC Interests under valid and subsisting leases, licenses, permits, concessions, concession agreements, Contracts, subleases, reservations or other agreements, except where the failure to so hold the AOC Interests would not have a Material Adverse Effect upon AOC; and (ii) except as disclosed in the AOC Disclosure Letter, it is not aware of any defects, failures or impairments in the title of AOC to its oil and natural gas properties, whether or not an action, suit, proceeding or inquiry is pending or threatened and whether or not discovered by any third party, which in aggregate could have a Material Adverse Effect on: (A) the quantity and pre-tax present worth values of the oil and natural gas reserves of AOC shown in the AOC Reserves Report; (B) the current production of AOC; or (C) the current cash flow of AOC.

(w) Production Allowables: Except as disclosed in the AOC Disclosure Letter, none of the wells in which AOC holds an interest has been produced in excess of applicable production allowables imposed by any Applicable Laws or any Governmental Authority and AOC does not have any knowledge of any impending change in production allowables imposed by any Applicable Law or any Governmental Authority that may be applicable to any of the wells in which any of them holds an interest, other than changes of general application in the jurisdiction in which such wells are situate except to the extent that such non-compliance or changes would not in the aggregate have a Material Adverse Effect on AOC.

(x) Production Penalties: AOC has not received notice of any production penalty or similar production restriction of any nature imposed or to be imposed by any Governmental Authority and, to AOC’s knowledge, none of the wells in which it holds an interest is subject to any such penalty or restriction except to the extent that any such penalty or restriction would not have a Material Adverse Effect on AOC.

(y) Leases and Title Documents: (i) AOC has not received notice of any default under any of the leases and other title and operating documents or any other agreement or instrument pertaining to its oil and natural gas assets to which it is a party or by or to which it or any such assets are bound or subject except to the extent that such defaults would not in the aggregate have a Material Adverse Effect on AOC. (ii) Except as disclosed in the AOC Disclosure Letter, to the knowledge of AOC: (A) AOC is in good standing under all, and is not in default under any; and (B) there is no existing condition, circumstance or matter which constitutes or which, with the passage of time or the giving of notice, would constitute a default under any, leases and other title and operating documents or any other agreements and instruments pertaining to its oil and natural gas assets to which it is a party or by or to which it or such assets are bound or subject and, to the knowledge of AOC, all such leases, title and operating documents and other agreements and instruments are in good standing and in full force and effect and none of the counterparties to such leases, title and operating documents and other agreements and instruments is in default thereunder except to the extent that such defaults would not in the aggregate have a Material Adverse Effect on AOC.

(z) Quiet Enjoyment: Subject to the applicable title and operating documents, AOC is entitled to enter into and upon, hold and enjoy its oil and gas assets for the residue of the terms of the applicable leases and licenses and all renewals or extensions thereof for their own use and benefit, without any lawful interruption by any Person claiming or to claim by, through or under AOC.

(aa) Take or Pay: Except as disclosed in the AOC Disclosure Letter, AOC’s oil and gas assets are not affected by any take or pay obligations or any other obligation to deliver petroleum substances to any third party without receiving (and being entitled to retain without deduction) full payment for such petroleum substances at current market or contract prices at the time of delivery.

(bb) Real Property: Except for: (i) the lease of office space dated February 5, 2020 between AOC and Bow Valley Leaseholds Limited; and (ii) the office lease dated January 31, 2020 between AOC and Canadian Property Holdings (Alberta) Inc. (collectively the “ AOC Office Leases ”), AOC is not a party to any lease or agreement in the nature of a lease for real property, whether as lessor or lessee.

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(cc) Operation and Condition of Wells: All of the wells for which AOC: (i) was or is operator, have, while AOC was the operator of such well, been drilled and, if and as applicable, completed, operated and abandoned in accordance with good and prudent oil and gas industry practices in Canada and Applicable Laws; and (ii) was not or is not operator, have, to AOC’s knowledge, been drilled and, if and as applicable, completed, operated and abandoned in accordance with good and prudent oil and gas industry practices in Canada and Applicable Laws.
(dd) Operation and Condition of Tangibles: All tangible depreciable property or assets comprising, located within, on or about the AOC Assets were or have been constructed, operated and maintained in accordance with good and prudent oil and gas industry practices in Canada and Applicable Laws during all periods in which AOC was the operator thereof and are in good condition and repair, ordinary wear and tear excepted, and are useable in the ordinary course of business.
(ee) No Expropriation: No assets or properties of AOC have been taken or expropriated by any Governmental Authority nor, as of the date hereof, has any notice or proceeding in respect thereof been given or commenced or threatened nor, to the knowledge of AOC, is there any intent or proposal to give any such notice or to commence any such proceeding.
(ff) Government Incentives: All filings made by AOC under which AOC has received or is entitled to government incentives have been made in compliance with all Applicable Laws and contain no misrepresentations which could cause any material amount previously paid to AOC or previously accrued on the accounts thereof to be recovered or disallowed.
(gg) Insurance: AOC is covered by valid and currently effective insurance policies issued in favour of AOC that AOC has determined to be commercially reasonable, taking into account the industries in which AOC operates. With respect to each insurance policy issued in favour of AOC, or pursuant to which AOC is a named insured or otherwise a beneficiary under an insurance policy:
(i) the policy is in full force and effect and all premiums due thereon have been paid;
(ii) AOC is not in breach or default, and AOC has not taken any action, or failed to take any action that, with notice or the lapse of time, would constitute such a breach or default, or permit termination or modification of, any such policy;
(iii) to the knowledge of AOC, no insurer on any such policy has been declared insolvent or placed in receivership, debt restructuring proceedings or liquidation, and no notice of cancellation or termination has been received by AOC with respect to any such policy;
(iv) to the knowledge of AOC, none of such policies will terminate or lapse by reason of the transactions contemplated by this Agreement.
(hh) Governmental Authorizations: AOC has obtained and is in compliance with all material Governmental Authorizations that are required by Applicable Laws for AOC to conduct its business as now conducted or as proposed to be conducted prior to the Effective Time and no such Governmental Authorizations will be impaired or otherwise adversely affected by the entering into of this Agreement or the consummation of the Arrangement.
(ii) Processing and Transportation Commitments: All of the third party processing and transportation agreements of AOC which cannot be terminated within 91 days or less without penalty are disclosed in the AOC Disclosure Letter and other than as set forth in the AOC Disclosure Letter, AOC has no third party processing or transportation agreements or any obligations to deliver sales volumes to any other Person which cannot be terminated in 91 days or less without penalty.
(jj) No Restrictions on Business: AOC is not a party to or bound or affected by any commitment, agreement, judgment, injunction, order, decree or document binding upon AOC containing any covenant expressly prohibiting, restricting or limiting its freedom or ability to: (i) compete in any line of business or geographic region; (ii) transfer or move any of its AOC Assets or operations; (iii) conduct any material business practice of AOC as now conducted; or (iv) effect any material acquisition of property by AOC (including following the transactions contemplated by this Agreement).
(kk) No Areas of Mutual Interest: Except as disclosed in the AOC Disclosure Letter, there are no material active areas of mutual interest provisions or areas of exclusion in any of the Contracts or otherwise to which AOC or the AOC Assets are subject.
(ll) No Purchase Rights: Except as contemplated by the Arrangement or as disclosed in the AOC Disclosure Letter, no Person now has any agreement or option or any right capable of becoming an agreement which is created by, through or under AOC for the purchase from AOC of any of AOC Assets.
(mm) No Drilling Commitments: Except as set forth in the AOC Disclosure Letter, AOC is not subject to any outstanding obligation to drill or participate in the drilling of any wells.
(nn) No Production Limits: Except production limits of general application in the oil and gas industry, to AOC’s knowledge, none of the wells of AOC are subject to production or other penalties or restrictions imposed by any Applicable Law.
(oo) Wells, Facilities and Lands: The AOC Disclosure Letter sets forth a materially complete and accurate description of the wells, facilities and lands of AOC as at the date hereof.
(pp) AOC Reserves Report: AOC has made available to Sproule, prior to the issuance of its report dated March 10, 2021 evaluating the crude oil, natural gas liquids and natural gas reserves of AOC as at December 31, 2020 (the “ AOC Reserves Report ”), for the purpose of preparing the AOC Reserves Report, all information requested by Sproule which information did not contain any misrepresentation at the time such information was provided. Except with respect to changes in the prices of oil and gas or as a result

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of production since such time, AOC has no knowledge of any Material Adverse Change in any production, reserves or other relevant information provided to Sproule since the date that such information was provided. AOC believes that the AOC Reserves Report reasonably presents the quantity and pre-tax present worth values of the oil and natural gas reserves attributable to the crude oil, natural gas liquids and natural gas properties evaluated in such report as of its effective date based upon information available at the time such reserves information was prepared, and AOC believes that, at the date of such report, such report did not (and as of the date hereof, except as may be attributable to changes in the prices of oil and gas or as a result of production, in either case since the date of such report, does not) overstate the aggregate quantity or pre-tax present worth values of such reserves or the estimated monthly production volumes therefrom.

(qq) Absence of Undisclosed Liabilities: AOC does not have any material liabilities of any nature (matured or unmatured, fixed or contingent), other than:

(i) those set forth or adequately provided for in the most recent balance sheet and associated notes thereto included in the AOC Financial Statements (for the purposes of this Section, the “ AOC Balance Sheet ”);
(ii) those incurred subsequent to the date of the AOC Balance Sheet in the ordinary course of business; and
(iii) those incurred in connection with the execution of this Agreement.
(rr) Absence of Undisclosed Changes: There has not been any Material Adverse Change in the capital, assets, liabilities or obligations (absolute, accrued, contingent or otherwise) of AOC from the position set forth in the AOC Financial Statements and AOC has not incurred or suffered a Material Adverse Change since December 31, 2020 and since that date there have been no material facts, transactions, events or occurrences which would have a Material Adverse Effect on AOC.
(ss) No Defaults: AOC is not in default under, and there exists no event, condition or occurrence which, after notice or lapse of time or both, would constitute such a default under, any Contract, or Governmental Authorization to which it is a party or by which it is bound which would, if terminated or upon exercise of a right made available to a third party solely by a reason of such a default due to such default, individually or in the aggregate, have a Material Adverse Effect on AOC. AOC is not in violation of any Applicable Laws which violation could have a Material Adverse Effect on AOC.
(tt) Pre-emptive Rights: Except as disclosed in the AOC Disclosure Letter, there are no outstanding rights of first refusal or other pre-emptive rights of purchase which entitle any Person to acquire any of the material AOC Assets that will be triggered or accelerated by the Arrangement.
(uu) Environmental: Except to the extent that violations or other matters referred to in this Section 4.1(uu) would not, individually or in the aggregate, have a Material Adverse Effect on AOC:
(i) AOC is not in violation of any applicable Environmental Laws;
(ii) AOC has operated its business at all times and has received, handled, used, stored, treated, shipped and disposed of all Hazardous Substances in compliance with Environmental Laws;
(iii) there have been no spills, releases, deposits or discharges of Hazardous Substances, or wastes into the earth, subsoil, underground waters, air or into any body of water or any municipal or other sewer or drain water systems by AOC, or on or underneath any location which is or was currently or formerly owned, leased or otherwise operated by AOC, that have not been fully remediated;
(iv) no orders, directions or notices have been issued and remain outstanding pursuant to any Environmental Laws relating to the business or AOC Assets of which AOC has received notice;
(v) AOC has not failed to report to the proper Governmental Authority the occurrence of any event which is required to be so reported by any Environmental Law;
(vi) AOC holds all Environmental Approvals required in connection with the operation of its business and the ownership and use of its AOC Assets, all Environmental Approvals are in full force and effect, and AOC has not received any notification pursuant to any Environmental Laws that any work, repairs, constructions or capital expenditures are required to be made by it as a condition of continued compliance with any Environmental Laws or Environmental Approvals, or that any Environmental Approval referred to above is about to be reviewed, made subject to limitation or conditions, revoked, withdrawn or terminated;
(vii) there are no pending or, to the knowledge of AOC, threatened claims, liens or Encumbrances resulting from Environmental Laws with respect to any of the assets or properties, including AOC Assets, currently or formerly owned, leased, operated or otherwise used by AOC; and
(viii) except pursuant to the asset purchase and sale agreements entered into by AOC prior to the date hereof, a copy of each of which has been made available for Surge’s review, AOC has not assumed or retained by contract or operation of law any losses, expenses, claims, damages or liabilities of any third-party pursuant to applicable Environmental Laws.
(vv) Material Contracts: The AOC Disclosure Letter contains an accurate list of all of the following Contracts, correct, current and complete copies of which have been made available to Surge (the “ AOC Material Contracts ”): (i) all material Contracts containing any rights on the part of any Person, including joint venture partners or entities, to acquire oil and gas or other property rights from AOC; (ii) all Contracts containing any rights on the part of AOC to acquire oil and gas or other property rights from any Person;

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(iii) any material Contract in respect of which the applicable transaction has not yet been consummated for the acquisition or disposition of assets or securities or other equity interests of another Person; (iv) any material standstill or similar Contract currently restricting the ability of AOC to offer to purchase or purchase the assets or equity securities of another Person; (v) all Contracts which entitle a party to rights of termination, the terms or conditions of which may or will be altered, or which entitle a party to any fee, payment, penalty or increased consideration, in each case as a result of the execution of this Agreement, the consummation of the transactions contemplated hereby or a “change in control” of AOC including without limitation any seismic license or similar agreements; (vi) all Contracts pursuant to which AOC will, or may reasonably be expected to, result in a requirement of AOC to expend more than an aggregate of $100,000 or receive or be entitled to receive revenue of more than an aggregate of $100,000 in either case in the next 12 months, other than Contracts which are in the ordinary course of AOC. Each of such AOC Material Contracts constitutes a legally valid and binding agreement of AOC, enforceable in accordance with their respective terms. To the knowledge of AOC, no party to a AOC Material Contract is in default in the observance or performance of any term or obligation to be performed by it under any such Contract or agreement which is material to the business of AOC and no event has occurred which with notice or lapse of time or both would directly or indirectly constitute such a default, in any such case which default or event would reasonably be expected to have a Material Adverse Effect on AOC.

(ww) Employee Benefit Plans: AOC has made available to Surge true, complete and correct copies of each employee benefits plan (collectively, the “ AOC Plans ”) covering active, former or retired employees of AOC, any related trust agreement, annuity or insurance contract or other funding vehicle, and:

(i) each AOC Plan has been maintained and administered in material compliance with its terms and is, to the extent required by Applicable Law or contract, fully funded without having any deficit or unfunded actuarial liability or adequate provision has been made therefor;
(ii) all required employer contributions under any such plans have been made and the applicable funds have been funded in accordance with the terms thereof;
(iii) each AOC Plan that is required or intended to be qualified under Applicable Law or registered or approved by a Governmental Authority has been so qualified, registered or approved by the appropriate Governmental Authority, and to the knowledge of AOC, nothing has occurred since the date of the last qualification, registration or approval that would reasonably be expected to adversely affect, or cause, the appropriate Governmental Authority to revoke such qualification, registration or approval;
(iv) to the knowledge of AOC, there are no pending or anticipated claims against or otherwise involving any of the AOC Plans and no suit, action or other litigation (excluding claims for benefits incurred in the ordinary course of AOC Plan activities) has been brought against or with respect to any AOC Plan;
(v) all contributions, reserves or premium payments required to be made to the AOC Plans have been made or provided for; and
(vi) AOC does not have any obligations for retiree health and life benefits under any AOC Plan.
(xx) Employees:
(i) The AOC Disclosure Letter includes a complete list of all employees and independent contractors/consultants of AOC, including location of employment, hire date and cumulative length of service, position, compensation (including but not limited to salary or wage rate, bonus and commissions), vacation entitlement, current status (full time or part-time, active or non-active (and if non-active, the reason for leave and expected date of return), and whether they are subject to an employment contract.
(ii) No trade union, council of trade unions, employee bargaining agency or affiliated bargaining agent holds bargaining rights with respect to any employees of AOC by way of certification, interim certification, voluntary recognition, designation or successor rights or has applied to have AOC declared a related employer or successor employer pursuant to applicable labour legislation. AOC has not engaged in any unfair labour practices and, no strike, lock-out, work stoppage, or other labour dispute is occurring at AOC. There are no threatened or, to AOC’s knowledge, pending strikes, work stoppages, picketing, lock-outs, hand-billings, boycotts, slowdowns or similar labour related disputes pertaining to AOC. AOC has not engaged in any closing or lay-off activities within the past two years that would violate or in any way subject AOC to the group termination or lay-off requirements of Applicable Laws.
(iii) AOC has not recognized any trade union or has any staff association, staff council, works council or other organisation formed for or arrangements having a similar purpose and no notification to any trade union, staff association, staff council, works council or other organisation formed for or in respect of any arrangements having a similar purpose is required by AOC for the purpose of consummating the transactions contemplated by this Agreement.
(yy) Employment Agreements: Except as disclosed in the AOC Disclosure Letter, AOC is not a party to any Contract of employment or consultancy which: (i) may not be terminated on one month’s notice; or (ii) provides for payments occurring on a change of control of AOC.
(zz) Brokers and Finders: Other than pursuant to the AOC Financial Advisory Agreement, which is included in the AOC Disclosure Letter, AOC has not retained nor will it retain any financial advisor, broker, agent or finder or pay or agreed to pay any financial advisor, broker, agent or finder on account of this Agreement, any transaction contemplated hereby or any transaction presently ongoing or contemplated without the consent of Surge (which consent will not be unreasonably withheld or delayed).

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(aaa) Rights Plans: Other than the AOC Options and AOC Warrants, AOC does not have a shareholder rights plan or any other form of plan, agreement, Contract or instrument that will trigger any rights to acquire AOC Shares or other securities of AOC or rights, entitlements or privileges in favour of any Person upon the entering into of this Agreement or in connection with the Arrangement.
(bbb) AOC Fairness Opinion. AOC has received the AOC Fairness Opinion.
(ccc) Board Approval: The AOC Board has unanimously made the determinations and recommendations as set forth in Section 2.9.
(ddd) Proceeds of Crime: AOC has not, directly or indirectly, (i) made or authorized any contribution, payment or gift of funds or property to any official, employee or agent of any governmental agency, authority or instrumentality of any jurisdiction, or (ii) made any contribution to any candidate for public office, in either case, where either the payment or the purpose of such contribution, payment or gift was, is, or would be prohibited under the Canada Corruption of Foreign Public Officials Act (Canada) or the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) or the rules and regulations promulgated thereunder or under any other legislation of any relevant jurisdiction covering a similar subject matter applicable to AOC and its operations and AOC has instituted and maintained policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance with such legislation.
(eee) Swaps: Except as provided in the AOC Disclosure Letter, AOC has no obligations or liabilities, direct or indirect, vested or contingent in respect of any rate swap transactions, basis swaps, forward rate transactions, commodity swaps, commodity options, equity or equity index swaps, equity or equity index options, bond options, interest rate options, foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross currency rate swap transactions, currency options, production sales transactions having terms greater than 30 days or any other similar transactions (including any option with respect to any of such transactions) or any combination of such transactions.
(fff) Arrangements in Respect of Outstanding Securities: Other than the AOC Shareholder Agreement, neither AOC nor (to the knowledge of AOC) any of the AOC Shareholders is a party to any shareholders agreement, pooling agreement, voting trust or other similar type of arrangements in respect of outstanding securities of AOC.
(ggg) Insiders: Other than as set forth in the Disclosure letter, to the knowledge of AOC, no insider of AOC has a present intention to sell any securities of AOC, other than pursuant to the Arrangement.
(hhh) Operational Matters: Except to the extent that any matter referenced to in this Subsection 4.1(hhh) does not, and would not, reasonably be expected to have a Material Adverse Effect on AOC, all rentals, royalties, overriding royalty interests, production payments, net profits, interest burdens, payments and obligations due and payable, or performable, as the case may be, on or prior to the date of this Agreement under, with respect to, or on account of, any direct or indirect assets of AOC has been, in all material respects: (i) duly paid; (ii) duly performed; or (iii) provided for prior to the date hereof and all costs, expenses and liabilities payable on or prior to the date hereof under the terms of any contracts and agreements to which AOC is directly or indirectly bound have been properly and timely paid, except for such expenses that are being currently paid prior to delinquency in the ordinary course of business.
(iii) No Guarantees: AOC has not guaranteed, endorsed, assumed, indemnified (other than pursuant to indemnity agreements with its directors and officers and as contemplated by the by-laws of AOC and Applicable Laws, standard indemnity agreements in financial services and underwriting and agency agreements and indemnities provided in the ordinary course to industry partners, service providers and asset vendors) or accepted any responsibility for, and does not and will not guarantee, endorse, assume, indemnify or accept any responsibility for, contingently or otherwise, any indebtedness or the performance of any obligation of AOC’s directors, officers, employees, consultants or AOC Shareholders.
(jjj) Payments to Employees, Non-Residents, Etc.: AOC has: (i) withheld from each payment made to any of its present or former employees, officers or directors, and to all Persons who are non-residents of Canada for the purposes of the Tax Act, and to other Persons, all amounts required by Applicable Law or administrative practice to be withheld and has remitted such amounts within the prescribed periods to the appropriate Taxing Authority; (ii) remitted all Taxes and has remitted such amounts to the proper Taxing Authority within the time required by Applicable Law; and (iii) charged, collected and remitted, on a timely basis, all Taxes as required by Applicable Law on any sale, supply, delivery whatsoever, made by AOC.
(kkk) AOC Net Debt: The AOC Net Debt is not more than $16,000,000 as of the date hereof. (lll) AOC Transactions Costs: The AOC Disclosure Letter sets out a genuine pre-estimate of the AOC Transaction Costs, including a detailed breakdown of such AOC Transaction Costs, which AOC Transaction Costs will not exceed $7,600,000.
(mmm) AOC Tax Pools: AOC Tax Pools are no less than the amount set forth in the AOC Disclosure Letter, as at the dates set forth thereon, including a detailed breakdown of such AOC Tax Pools, and AOC has not taken any action, or entered into any transaction, other than in the ordinary course of business, that would have the effect of materially reducing any amount set forth therein.
(nnn) Authorizations for Expenditures: As of the date hereof, AOC has authorizations for expenditures and other like commitments with respect to the AOC Assets, and all outstanding authorizations and commitments are set forth in the AOC Disclosure Letter.
(ooo) Liability Management Ratio: The liability management ratio of AOC is greater than 5.0 as of the date hereof.
(ppp) Production: AOC’s average production on the AOC Assets for the 14-day period ended June 14, 2021 was not less than 4,200 BOE/d.
(qqq) Location of Assets and U.S. Sales: All of the AOC Assets of each AOC Asset, including all entities “controlled by” AOC for purposes of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, are located outside the United States and did not generate sales in or into the United States exceeding US$92 million during AOC’s most recent completed fiscal year.

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(rrr) Investment Company: AOC is not registered or, assuming it was incorporated in the United States, required to be registered as an “investment company” pursuant to the United States Investment Company Act of 1940, as amended.
(sss) Exchange Act: No class of securities of AOC is registered or required to be registered pursuant to Section 12 of the United States Securities Exchange Act of 1934 , as amended, nor does AOC have a reporting obligation pursuant to Section 15(d) of the U.S. Securities Act.
(ttt) Standstill Provisions: AOC has not waived any standstill or similar provisions contained in a confidentiality agreement or otherwise for any Person.
(uuu) No Withheld Information: To the knowledge of AOC, AOC has not withheld from Surge any material information or documents concerning AOC, or its assets or liabilities during the course of Surge’s review of AOC and its assets and liabilities. No representation or warranty contained in this Agreement contains or will contain any untrue statement of a material fact or omits to state a material fact which is necessary in order to make the statements herein or therein not misleading.
(vvv) AOC Disclosure Letter: The facts and circumstances disclosed by AOC to Surge in the AOC Disclosure Letter are true and correct in all material respects.

4.2 Representations and Warranties of Surge

Surge represents and warrants to and in favour of AOC and acknowledges that AOC is relying upon such representations and warranties in connection with the matters contemplated by this Agreement and the consummation of the Arrangement:

(a) Organization and Qualification: Each of Surge and the Surge Subsidiary has been duly incorporated, amalgamated or organized, as the case may be, and is validly subsisting under the Applicable Laws of the jurisdiction of their respective incorporation, amalgamation or organization, as the case may be, and has the requisite power and authority to own its assets and properties as now owned and to carry on its business as now conducted. Each of Surge and the Surge Subsidiary is duly registered or authorized to conduct its affairs or do business, as applicable, and is in good standing in each jurisdiction in which the character of its assets and properties, owned, leased, licensed or otherwise held, or the nature of its activities makes such registration or authorization necessary, except where the failure to have such standing which, if not in place, would not, individually or in the aggregate, have a Material Adverse Effect on Surge and the Surge Subsidiary, taken as a whole, or significantly impede the ability of Surge to consummate the Arrangement. Copies of the constating documents of Surge have been provided to AOC, together with all amendments to date, and are accurate and complete as of the date hereof and have not been amended or superseded.

(b) Authority Relative to this Agreement: Surge has the requisite corporate power and authority to execute this Agreement, the Support and Hold Period Agreements and to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and the Support and Hold Period Agreements and the consummation by Surge of the transactions contemplated by the Arrangement has been duly authorized by the Surge Board and, subject to the Competition Act Approval and the approval of the Surge Issuance Resolution at the Surge Meeting, no other proceedings on the part of Surge are necessary to authorize this Agreement or the Arrangement. This Agreement and each Support and Hold Period Agreement has been duly executed and delivered by Surge and constitutes a legal, valid and binding obligation of Surge enforceable against it in accordance with its terms, subject to the qualification that such enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other Applicable Laws of general application relating to or affecting rights of creditors and that equitable remedies, including specific performance, are discretionary and may not be ordered.

(c) Subsidiaries: Other than the Surge Subsidiary, Surge has no subsidiaries.
(d) No Violations: Except as contemplated by this Agreement:
(i) neither the execution and delivery of this Agreement by Surge nor the consummation of the transactions contemplated by the Arrangement nor compliance by Surge with any of the provisions hereof will:
- (A) other than the consents or approvals required under the Surge Credit Facilities and the approval of the TSX, violate, conflict with, or result in a breach of any provision of, require any consent, approval or notice under, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) or result in a right of termination or acceleration under, or result in the creation of any Encumbrance upon any of the properties or assets of Surge or the Surge Subsidiary or cause any indebtedness to come due before its stated maturity or cause any credit to cease to be available, under any of the terms, conditions or provisions of: (1) articles or by-laws of Surge or the Surge Subsidiary; (2) any material Contract of Surge; or (3) any Governmental Authorization;
- (B) subject to compliance with applicable statutes and regulations and stock exchange rules, including obtaining the Competition Act Approval and approval of the Surge Issuance Resolution at the Surge Meeting, violate any judgment, ruling, order, writ, injunction, determination, award, decree, statute, ordinance, rule or regulation applicable to Surge or the Surge Subsidiary or any of their respective properties or assets; or
- (C) cause the suspension or revocation of any authorization, consent, approval or license currently in effect; and
(ii) other than in connection with or in compliance with the provisions of Applicable Laws and the rules of the TSX in relation to the completion of the Arrangement or which are required to be fulfilled post Arrangement, and except for the consents or

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approvals required under the Surge Credit Facilities, the approval of the Surge Issuance Resolution at the Surge Meeting and the obtaining of the Final Order and the Competition Act Approval:

  - (A) there is no legal impediment to Surge’s consummation of the Arrangement; and

  - (B) no filing or registration with, or authorization, consent or approval of, any domestic or foreign public body or authority is required of Surge in connection with the consummation of the Arrangement, except for such filings or registrations which, if not made, or for such authorizations, consents or approvals which, if not received, would not, individually or in the aggregate, have a Material Adverse Effect on Surge and the Surge Subsidiary, taken as a whole, or significantly impede the ability of Surge to consummate the Arrangement.

(e) Consideration: Surge has reserved and allotted a sufficient number of Surge Shares as are issuable as the Consideration pursuant to the Arrangement, and, subject to the terms and conditions of the Arrangement, such Surge Shares will be validly issued as fully paid and non-assessable.
(f) Litigation: Except as disclosed in the Surge Disclosure Letter, there are no claims, actions, suits, proceedings, investigations, arbitrations, audits, grievances, assessments or reassessments in existence or pending or, to the knowledge of Surge, threatened or for which there is a reasonable basis, affecting or that would reasonably be expected to affect Surge or the Surge Subsidiary or affecting or that would reasonably be expected to affect any of their respective properties or assets at law or in equity or before or by any court or Governmental Authority which claim, action, suit, proceeding, investigation, arbitration, audit, grievance, assessment or reassessment involves a possibility of any judgment against or liability of Surge or the Surge Subsidiary in an amount in excess of $100,000.
(g) Taxes, etc.:
(i) Except as disclosed in the Surge Disclosure Letter, all Tax Returns required to be filed by or on behalf of Surge and the Surge Subsidiary have been duly filed on a timely basis and all such Tax Returns are true, complete and correct in all material respects. All Taxes or instalments of Taxes shown to be payable on such Tax Returns, or on subsequent assessments with respect thereto, have been paid in full on a timely basis, and no other material Taxes are payable by Surge or the Surge Subsidiary with respect to items or periods covered by such Tax Returns.
(ii) Except as disclosed in the Surge Disclosure Letter, there are no assessments or reassessments of any Taxes that have been issued or are outstanding, or pursuant to which there are any amounts owing. Except as disclosed in the Surge Disclosure Letter, no Governmental Authority has audited, challenged or disputed Surge or the Surge Subsidiary in respect of Taxes or of any returns, filings or other reports filed under any statute providing for Taxes. Except as disclosed in the Surge Disclosure Letter, Surge is not negotiating any proposed assessment or reassessment with any Governmental Authority. Surge is not aware of any contingent liabilities for a material amount of Taxes or any grounds for an assessment or reassessment with respect thereto including, without limitation, aggressive treatment of income, expenses, credits or other claims for deduction under any return or notice. Surge has not received any indication from any Governmental Authority that an audit, assessment or reassessment is proposed in respect of any Taxes, regardless of its merits. Surge has not executed or filed with any Governmental Authority any agreement extending the period for the filing of any Tax Returns or for the assessment, reassessment or collection of any Taxes. Surge has not requested, nor entered into any agreement or other arrangement, or executed any waiver providing for, any extension of time within which: (A) to file any Tax Return for which Surge is or may be liable; (B) to file any elections, designations or similar documents or instruments relating to Taxes for which Surge is or may be liable; or (C) any Governmental Authority may assess, reassess or collect Taxes for which Surge is or may be liable.
(iii) Surge has paid or has withheld and remitted to the appropriate Taxing Authority all Taxes on a timely basis and in accordance with Applicable Laws relating to Taxes, including any instalments or prepayments of Taxes, that are due and payable whether or not shown as being due on any Tax Return, or, where payment is not yet due, Surge has established adequate accruals in conformity with GAAP in the Surge Financial Statements for the period covered by such financial statements for any Taxes, including income taxes and related future taxes, if applicable, that have not been paid, whether or not shown as being due on any Tax Return. Surge has made adequate provision or disclosure in its books and records for any Taxes accruing in respect of any period subsequent to the period covered by such financial statements, whether or not shown as being due on any Tax Return. The liability for Taxes has been assessed for all taxation periods up to and including December 31, 2020.
(iv) No material deficiencies exist, or to the knowledge of Surge, have been asserted or threatened by any Governmental Authority with respect to Taxes of Surge that have not yet been settled.
(h)
Investment Canada Act: Surge is not a “non-Canadian” within the meaning of the Investment Canada Act (Canada).
(i) Tax Act Residency: Surge is not a non-resident for the purposes of the Tax Act and is a taxable Canadian corporation within the meaning of subsection 89(1) of the Tax Act.
(j) Reporting Issuer Status: Surge is a “reporting issuer” in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador and is in material compliance with all Applicable Securities Laws therein and the Surge Shares are listed and posted for trading on the TSX. Surge is not in default of any material requirements of any Applicable Securities Laws or any rules or regulations of, or agreement with, the TSX. No delisting, suspension of trading in or cease trading order with respect to the Surge Shares is pending or, to the knowledge of Surge, threatened. Surge has timely filed with the Securities Authorities all material forms, reports, schedules, statements and other documents required to be filed by Surge with the Securities Authorities since becoming a “reporting issuer”. Surge has not filed any confidential material change report that, at the date hereof, remains confidential.

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(k) Capitalization: As of the date hereof, the authorized capital of Surge consists of an unlimited number of Surge Shares and an unlimited number of preferred shares, issuable in series. As of the date hereof, there are issued and outstanding 379,594,375 Surge Shares and no other shares are issued and outstanding. Other than: (i) Surge RSAs to acquire 9,053,587 Surge Shares; (ii) Surge PSAs to acquire 10,643,720 Surge Shares (assuming a Payout Percentage (as defined in the Surge LTIP) of 100%), and (iii) an aggregate of $79.0 million of outstanding convertible debentures, convertible, at the holder’s option, into Surge Shares, there are no options, warrants or other rights, plans agreements or commitments of any nature whatsoever requiring the issuance, sale or transfer by Surge of any securities of Surge (including Surge Shares) or any securities convertible into, or exchangeable or exercisable for, or otherwise evidencing a right to acquire, any securities of Surge (including Surge Shares). All outstanding Surge Shares have been duly authorized and validly issued, are fully paid and non-assessable and are not subject to, nor were they issued in violation of, any pre-emptive rights and all Surge Shares issuable upon the exercise of Surge RSAs and Surge PSAs will be duly authorized and validly issued as fully paid and non-assessable and will not be subject to any pre-emptive rights. Other than the Surge Shares, there are no securities of Surge outstanding which have the right to vote generally (except that the Surge RSAs and Surge PSAs are exercisable or convertible into or exchangeable for securities having the right to vote generally) with the Surge Shareholders on any matter.
(l) Equity Monetization Plans: There are no outstanding stock appreciation rights, phantom equity, profit sharing plan or similar rights, agreements, arrangements or commitments payable to any employee of Surge and which are based upon the revenue, value, income or any other attribute of Surge.
(m) No Orders: No order, ruling or determination having the effect of suspending the sale of, or ceasing the trading of, the Surge Shares or any other securities of Surge have been issued by any Governmental Authority and is continuing in effect and no proceedings for that purpose have been instituted, are pending or, to the knowledge of Surge, are contemplated or threatened under any Applicable Laws or by any Governmental Authority.
(n) Surge Public Record: The information and statements set forth in the Surge Public Record, as it relates to Surge, are true, correct, and complete and did not contain any misrepresentation, as of the respective dates of such information or statements, and no material change has occurred in relation to Surge which is not disclosed in the Surge Public Record, and Surge has not filed any confidential material change reports which continue to be confidential.
(o) Surge Financial Statements: The Surge Financial Statements were prepared in accordance with GAAP, consistently applied (except: (i) as otherwise indicated in such financial statements and the notes thereto or, in the case of audited statements, in the related report of Surge’s independent auditors; or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes, are subject to normal year-end adjustments or may be condensed or summary statements), and present fairly in accordance with GAAP, consistently applied, the financial position, results of operations and changes in financial position of Surge and the Surge Subsidiary, on a consolidated basis, as of the dates thereof and for the periods indicated therein (subject, in the case of any unaudited interim financial statements, to normal year-end audit adjustments). There has been no material change in Surge accounting policies since January 1, 2021.
(p) Books and Records: The financial books, records and accounts of Surge, in all material respects: (i) have been maintained in accordance with good business practices on a basis consistent with prior years; (ii) are stated in reasonable detail and accurately and fairly reflect the material transactions and dispositions of the properties and assets of Surge; and (iii) accurately and fairly reflect the basis for the Surge Financial Statements. The corporate records and minute books of Surge have been maintained substantially in compliance with Applicable Laws and are complete and accurate in all material respects, and full access thereto has been provided to AOC, other than in relation to AOC and the Arrangement.
(q) Absence of Certain Changes or Events: Except for the Arrangement or any action taken in accordance with this Agreement, since January 1, 2021:
(i) Surge has conducted its business only in the ordinary course of business substantially consistent with past practice;
(ii) no liability or obligation of any nature (whether absolute, accrued, contingent or otherwise) material to Surge and the Surge Subsidiary, taken as a whole, has been incurred other than in the ordinary course of business or other than where such liability or obligation would not have a Material Adverse Effect on Surge and the Surge Subsidiary, taken as a whole;
(iii) there has been no Material Adverse Change in respect of Surge and the Surge Subsidiary, taken as a whole; and
(iv) Surge, and to the knowledge of Surge, no director, officer, employee or auditor of Surge, has received or otherwise had or obtained knowledge of any fraud or material complaint, allegation, assertion or claim, whether written or oral, regarding fraud or the accounting or auditing practices, procedures, methodologies or methods of Surge or its internal accounting controls.
(r) Surge Reserves Report: Surge has made available to Sproule, prior to the issuance of its report dated March 3, 2021 evaluating the crude oil, natural gas liquids and natural gas reserves of Surge as at December 31, 2020 (the “ Surge Reserves Report ”), for the purpose of preparing the Surge Reserves Report, all information requested by Sproule, which information did not contain any misrepresentation at the time such information was provided. Except as disclosed in the Surge Disclosure Letter and except with respect to changes in the prices of oil and gas or as a result of production since such time, Surge has no knowledge of any Material Adverse Change in any production, reserves or other relevant information provided to Sproule since the date that such information was provided. Surge believes that the Surge Reserves Report reasonably presents the quantity and pre-tax present worth values of the oil and natural gas reserves attributable to the crude oil, natural gas liquids and natural gas properties evaluated in such report as of its effective date based upon information available at the time such reserves information was prepared, and Surge believes that, at the date of such report, such report did not (and as of the date hereof, except as may be attributable to changes in prices or oil and gas or

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as a result of production, in either case since the date of such report or except as disclosed in the Surge Disclosure Letter, does not) overstate the aggregate quantity or pre-tax present worth values of such reserves or the estimated monthly production volumes therefrom.

(s)

(t)

Registration, Exemption Orders, Licenses, etc.: To the knowledge of Surge, Surge has obtained and is in compliance with Governmental Authorizations, except where the failure to obtain or be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Surge. Such Governmental Authorizations are in full force and effect in accordance with their terms, and no event has occurred or circumstance exists that (with or without notice or lapse of time) may constitute or result in a violation of any such Governmental Authorization, except where the violation would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Surge. No proceedings are pending or, to the knowledge of Surge, threatened, which could result in the revocation or limitation of any Governmental Authorization, and all steps have been taken and filings made on a timely basis with respect to each Governmental Authorization and its renewal, except where the failure to take such steps and make such filings would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Surge.

Compliance with Laws: The operations and business of Surge are and have been carried out in compliance with and not in violation of any Applicable Laws in all material respects, and Surge has not received any notice of any alleged material violation of any such Applicable Laws.

(u) Restrictions on Business Activities: There is no judgment, injunction or order binding upon Surge, and Surge is not subject to any contractual commitment, that has or could reasonably be expected to have the effect of prohibiting, restricting or impairing its business or, individually or in the aggregate, have a Material Adverse Effect on Surge.

(v)

Non-Arm’s Length Transactions: Except for Surge employee plans or amounts due as normal salaries and bonuses and in reimbursement of ordinary expenses or as set forth in the Surge Public Record, there are no Contracts or other transactions (including with respect to loans or other indebtedness) currently in place between Surge, on the one hand, and (i) any officer, director or employee of Surge, (ii) any holder of record or beneficial owner of 10% or more of the voting securities of Surge, or (iii) any associate or affiliate of any such Person (collectively, “Surge Related Parties”). No Surge Related Party, owns, has or is entitled to any royalty, net profits interest, carried interest, participation interest, or any other Encumbrances or claims of any nature whatsoever which are based on production from the properties and asset of Surge or any revenue or rights attributed thereto.

(w) Title: Although it does not warrant title to any of its assets, Surge does represent and warrant that:(i) It does not have reason to believe that Surge does not have title to or the irrevocable right to produce and sell its petroleum, natural gas and related hydrocarbons (for the purposes of this clause, the foregoing are referred to as the “ Surge Interests ”) and does represent and warrant that, to the knowledge of Surge, the Surge Interests are free and clear of adverse claims created by, through or under Surge, except as related to bank financing or those arising in the ordinary course of business, and, to the knowledge of Surge, Surge holds the Surge Interests under valid and subsisting leases, licenses, permits, concessions, concession agreements, Contracts, subleases, reservations or other agreements, except where the failure to so hold the Surge Interests would not have a Material Adverse Effect upon Surge; and (ii) it is not aware of any defects, failures or impairments in the title of Surge to its oil and natural gas properties, whether or not an action, suit, proceeding or inquiry is pending or threatened and whether or not discovered by any third party, which in aggregate could have a Material Adverse Effect on: (A) the quantity and pre-tax present worth values of the oil and natural gas reserves of Surge shown in the Surge Reserves Report; (B) the current production of Surge; or (C) the current cash flow of Surge.

(x)

Operation and Condition of Wells: All of the wells for which Surge: (i) was or is operator, have, while Surge was the operator of such well, been drilled and, if and as applicable, completed, operated and abandoned in accordance with good and prudent oil and gas industry practices in Canada and Applicable Laws; and (ii) was not or is not operator, have, to Surge’s knowledge, been drilled and, if and as applicable, completed, operated and abandoned in accordance with good and prudent oil and gas industry practices in Canada and Applicable Laws.

(y) Operational Matters: Except to the extent that any matter referenced to in this Subsection 4.2(y) does not, and would not, reasonably be expected to have a Material Adverse Effect on Surge, all rentals, royalties, overriding royalty interests, production payments, net profits, interest burdens, payments and obligations due and payable, or performable, as the case may be, on or prior to the date of this Agreement under, with respect to, or on account of, any direct or indirect assets of Surge has been, in all material respects: (i) duly paid; (ii) duly performed; or (iii) provided for prior to the date hereof and all costs, expenses and liabilities payable on or prior to the date hereof under the terms of any Contracts and agreements to which Surge is directly or indirectly bound have been properly and timely paid, except for such expenses that are being currently paid prior to delinquency in the ordinary course of business.

(z) Government Incentives: All filings made by Surge under which Surge has received or is entitled to government incentives have been made in compliance with all Applicable Laws and contain no misrepresentations which could cause any material amount previously paid to Surge or previously accrued on the accounts thereof to be recovered or disallowed.

(aa) Insurance: Surge is covered by valid and currently effective insurance policies issued in favour of Surge that Surge has determined to be commercially reasonable, taking into account the industries in which Surge operates. With respect to each insurance policy issued in favour of Surge, or pursuant to which Surge is a named insured or otherwise a beneficiary under an insurance policy:

(i) the policy is in full force and effect and all premiums due thereon have been paid;
(ii) Surge is not in breach or default, and Surge has not taken any action, or failed to take any action that, with notice or the lapse of time, would constitute such a breach or default, or permit termination or modification of, any such policy;

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(iii) to the knowledge of Surge, no insurer on any such policy has been declared insolvent or placed in receivership, debt restructuring proceedings or liquidation, and no notice of cancellation or termination has been received by Surge with respect to any such policy;
(iv) to the knowledge of Surge, none of such policies will terminate or lapse by reason of the transactions contemplated by this Agreement.
(bb) Governmental Authorizations: Surge has obtained and is in compliance with all material Governmental Authorizations that are required by Applicable Laws for Surge to conduct its business as now conducted or as proposed to be conducted prior to and after the Effective Time and no such Governmental Authorizations will be impaired or otherwise adversely affected by the entering into of this Agreement or the consummation of the Arrangement.
(cc) No Restrictions on Business: Except as disclosed in the Surge Disclosure Letter, Surge is not a party to or bound or affected by any commitment, agreement, judgment, injunction, order, decree or document binding upon Surge containing any covenant expressly prohibiting, restricting or limiting its freedom or ability to: (i) compete in any line of business or geographic region; (ii) transfer or move any of its properties, assets or operations; (iii) conduct any material business practice of Surge as now conducted; (iv) effect any material acquisition of property by Surge (including following the transactions contemplated by this Agreement), other than where such restrictions or limitations would not individually or in the aggregate have a Material Adverse Effect on Surge.
(dd) Pre-emptive Rights: There are no rights of first refusal, pre-emptive rights of purchase or similar right whereby any third party has the right to acquire or purchase any of Surge’s or Surge Subsidiary’s assets that would be triggered or accelerated as a consequence of the Parties entering into this Agreement, other than where such rights would not individually or in the aggregate have a Material Adverse Effect on Surge.
(ee) Absence of Undisclosed Liabilities: Surge does not have any material liabilities of any nature (matured or unmatured, fixed or contingent), other than:
(i) those set forth or adequately provided for in the most recent balance sheet and associated notes thereto included in the Surge Financial Statements (for the purposes of this Section, the “ Surge Balance Sheet ”);
(ii) those incurred subsequent to the date of the Surge Balance Sheet in the ordinary course of business; and
(iii) those incurred in connection with the execution of this Agreement.
(ff) Absence of Undisclosed Changes: There has not been any material change in the capital, assets, liabilities or obligations (absolute, accrued, contingent or otherwise) of Surge from the position set forth in the Surge Financial Statements and Surge has not incurred or suffered a Material Adverse Change since December 31, 2020 and since that date there have been no material facts, transactions, events or occurrences which would have a Material Adverse Effect on Surge.
(gg) No Defaults: Surge is not in default under, and there exists no event, condition or occurrence which, after notice or lapse of time or both, would constitute such a default under, any Contract, or Governmental Authorization to which it is a party or by which it is bound which would, if terminated or upon exercise of a right made available to a third party solely by a reason of such a default due to such default, individually or in the aggregate, have a Material Adverse Effect on Surge. Surge is not in violation of any Applicable Laws which violation could have a Material Adverse Effect on Surge.
(hh) Environmental: Except to the extent that violations or other matters referred to in this subparagraph would not, individually or in the aggregate, have a Material Adverse Effect on Surge and the Surge Subsidiary, taken as a whole:
(i) none of Surge or the Surge Subsidiary is in violation of any applicable Environmental Laws;
(ii) each of Surge and the Surge Subsidiary has operated its business at all times and has received, handled, used, stored, treated, shipped and disposed of all Hazardous Substances in compliance with Environmental Laws;
(iii) there have been no spills, releases, deposits or discharges of Hazardous Substances, or wastes into the earth, subsoil, underground waters, air or into any body of water or any municipal or other sewer or drain water systems by Surge or the Surge Subsidiary, or on or underneath any location which is or was currently or formerly owned, leased or otherwise operated by Surge or the Surge Subsidiary, that have not been fully remediated;
(iv) no orders, directions or notices have been issued and remain outstanding pursuant to any Environmental Laws relating to the business or assets of Surge or the Surge Subsidiary of which Surge or the Surge Subsidiary has notice;
(v) none of Surge or the Surge Subsidiary has failed to report to the proper Governmental Authority the occurrence of any event which is required to be so reported by any Environmental Law;
(vi) each of Surge and the Surge Subsidiary holds all Environmental Approvals required in connection with the operation of its business and the ownership and use of such assets, all Environmental Approvals are in full force and effect, and neither Surge nor the Surge Subsidiary has received any notification pursuant to any Environmental Laws that any work, repairs, constructions or capital expenditures are required to be made by it as a condition of continued compliance with any Environmental Laws or Environmental Approvals, or that any Environmental Approval referred to above is about to be reviewed, made subject to limitation or conditions, revoked, withdrawn or terminated;
(vii) there are no pending or, to the knowledge of Surge, threatened claims, liens or Encumbrances resulting from Environmental Laws with respect to any of the assets or properties currently or formerly owned, leased, operated or otherwise used by Surge or the Surge Subsidiary; and

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(viii) except pursuant to the asset purchase and sale agreements entered into by Surge prior to the date hereof, a copy of each of which has been made available for AOC’s review, Surge has not assumed or retained by contract or operation of law any losses, expenses, claims, damages or liabilities of any third-party pursuant to applicable Environmental Laws.
(ii) Material Contracts: Other than this Agreement, since January 1, 2019, Surge has not entered into any material contracts which are required to be filed by Surge under National Instrument 51-102 – Continuous Disclosure Obligations, except for those agreements which have been so filed by Surge.
(jj) Employment Agreements: Neither Surge nor the Surge Subsidiary is a party to any Contract of employment or consultancy which provides for payments occurring on a change of control of Surge or the Surge Subsidiary which will be triggered as a result of this Agreement or the consummation of the transactions contemplated herein.
(kk) Board Approval: The Surge Board has unanimously made the determinations and recommendations as set forth in Section 2.10.
(ll) Proceeds of Crime: Neither Surge nor the Surge Subsidiary has, directly or indirectly: (i) made or authorized any contribution, payment or gift of funds or property to any official, employee or agent of any governmental agency, authority or instrumentality of any jurisdiction; or (ii) made any contribution to any candidate for public office, in either case, where either the payment or the purpose of such contribution, payment or gift was, is, or would be prohibited under the Canada Corruption of Foreign Public Officials Act (Canada) or the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) or the rules and regulations promulgated thereunder or under any other legislation of any relevant jurisdiction covering a similar subject matter applicable to Surge or the Surge Subsidiary and their respective operations and each of Surge and the Surge Subsidiary has instituted and maintained policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance with such legislation.
(mm) Foreign Private Issuer: Surge is a “foreign private issuer” within the meaning of Rule 405 of Regulation C under the U.S. Securities Act.
(nn) Investment Company: Surge is not registered or, assuming it was incorporated in the United States, required to be registered as an “investment company” pursuant to the United States Investment Company Act of 1940 , as amended.
(oo) No Withheld Information: To the knowledge of Surge, Surge has not withheld from AOC any material information or documents concerning Surge, or its assets or liabilities during the course of AOC’s review of Surge and its assets and liabilities. No representation or warranty contained in this Agreement contains or will contain any untrue statement of a material fact or omits to state a material fact which is necessary in order to make the statements herein or therein not misleading.
(pp) Surge Disclosure Letter: The facts and circumstances disclosed by Surge to AOC in the Surge Disclosure Letter are true and correct in all material respects.

4.3 Privacy Issues

(a)
For the purposes of this Section 4.3, the following definitions shall apply:
(i) “ applicable law ” means, in relation to any Person, transaction or event, all applicable provisions of Applicable Laws by which such Person is bound or having application to the transaction or event in question, including applicable privacy laws;
(ii) “ applicable privacy laws ” means any and all applicable laws relating to privacy and the collection, use and disclosure of Personal Information in all applicable jurisdictions, including but not limited to the Personal Information Protection and Electronic Documents Act (Canada) or any comparable provincial law including the Personal Information Protection Act (Alberta) or both;
(iii) “ authorized authority ” means, in relation to any Person, transaction or event, any: (i) federal, provincial, municipal or local governmental body (whether administrative, legislative, executive or otherwise), both domestic and foreign; (ii) agency, authority, commission, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government; (iii) court, arbitrator, commission or body exercising judicial, quasi-judicial, administrative or similar functions; and (iv) other body or entity created under the authority of or otherwise subject to the jurisdiction of any of the foregoing, including any stock or other securities exchange, in each case having jurisdiction over such Person, transaction or event; and
(iv) “ Personal Information ” means information (other than business contact information when used or disclosed for the purpose of contacting such individual in that individual’s capacity as an employee or an official of an organization and for no other purpose) about an identifiable individual disclosed or transferred by one Party to the Other Party in accordance with this Agreement and/or as a condition of the Arrangement.
(b) The Parties hereto acknowledge that they are responsible for compliance at all times with applicable privacy laws which govern the collection, use or disclosure of Personal Information disclosed to either of the Parties pursuant to or in connection with this Agreement (the “ Disclosed Personal Information ”).
(c) Prior to the completion of the Arrangement, neither Party shall use or disclose the Disclosed Personal Information for any purposes other than those related to the performance of this Agreement and the completion of the Arrangement. After the completion of the transactions contemplated herein, a Party may only collect, use and disclose the Disclosed Personal Information for the purposes for which the Disclosed Personal Information was initially collected from or in respect of the individual to which such Disclosed Personal

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Information relates or for the completion of the transactions contemplated herein, unless (i) either Party shall have first notified such individual of such additional purpose, and where required by applicable law, obtained the consent of such individual to such additional purpose, or (ii) such use or disclosure is permitted or authorized by applicable law, without notice to, or consent from, such individual.

(d) Each of the Parties acknowledges and confirms that the disclosure of the Disclosed Personal Information is necessary for the purposes of determining if the Parties shall proceed with the Arrangement, and that the Disclosed Personal Information relates solely to the carrying on of the business or the completion of the Arrangement.
(e) Each of the Parties acknowledge and confirm that it has taken and shall continue to take reasonable steps to, in accordance with applicable law, prevent accidental loss or corruption of the Disclosed Personal Information, unauthorized input or access to the Disclosed Personal Information, or unauthorized or unlawful collection, storage, disclosure, recording, copying, alteration, removal, deletion, use or other processing of such Disclosed Personal Information.
(f) Subject to the following provisions, each of the Parties shall at all times keep strictly confidential all Disclosed Personal Information provided to it, and shall instruct those employees or advisors responsible for processing such Disclosed Personal Information to protect the confidentiality of such information in a manner consistent with the Parties’ obligations hereunder. Prior to the completion of the Arrangement, each of the Parties shall take reasonable steps to ensure that access to the Disclosed Personal Information shall be restricted to those employees or advisors of the respective Party who have a bona fide need to access such information in order to complete the Arrangement.
(g) Where authorized by applicable law, each of the Parties shall promptly notify the Other Party to this Agreement of all inquiries, complaints, requests for access, variations or withdrawals of consent and claims of which the Party is made aware in connection with the Disclosed Personal Information. To the extent permitted by applicable law, the Parties shall fully co-operate with one another, with the Persons to whom the Personal Information relates, and any authorized authority charged with enforcement of applicable privacy laws, in responding to such inquiries, complaints, requests for access, variations or withdrawals of consent and claims.
(h) Upon the expiry or termination of this Agreement, or otherwise upon the reasonable request of either Party, the Other Party shall forthwith cease all use of the Disclosed Personal Information acquired by it in connection with this Agreement and will return to the requesting Party or, at the requesting Party’s request, destroy in a secure manner, the Disclosed Personal Information (and any copies thereof) in its possession.

ARTICLE 5 CONDITIONS PRECEDENT

5.1 Mutual Conditions Precedent

The respective obligations of the Parties to consummate the transactions contemplated hereby, and in particular the Arrangement, are subject to the satisfaction, on or before the Effective Date or such other time specified, of the following conditions:

(a) Interim Order: The Interim Order shall have been granted in form and substance satisfactory to each of AOC and Surge, acting reasonably, and such order shall not have been set aside or modified in a manner unacceptable to AOC and Surge, each acting reasonably, on appeal or otherwise.
(b) Acquisitionco: Surge shall have incorporated Acquisitionco as a wholly-owned subsidiary of Surge in a manner consistent with the Plan of Arrangement.
(c) AOC Arrangement Resolution: The AOC Arrangement Resolution shall have been passed by the AOC Shareholders.
(d) Surge Issuance Resolution: The Surge Issuance Resolution shall have been passed by the Surge Shareholders.
(e) Final Order: The Final Order shall have been granted in form and substance satisfactory to each of AOC and Surge, acting reasonably, and such order shall not have been set aside or modified in a manner unacceptable to AOC and Surge, each acting reasonably, on appeal or otherwise.
(f) Effective Date: The Effective Date shall occur on or before the Outside Date.
(g) Surge Shares: The TSX shall have conditionally approved for listing all of the Surge Shares issuable to the AOC Shareholders pursuant to the Arrangement.
(h) Articles of Arrangement: The Articles of Arrangement to be filed with the Registrar in accordance with the Arrangement shall be in form and substance satisfactory to each of Surge and AOC, acting reasonably.
(i) Surge Credit Facilities:. The closing of the revisions to the Surge Credit Facilities shall have occurred prior to or contemporaneously with the consummation of the Arrangement and shall be on terms not materially less beneficial to Surge than those contained in the commitment letter, including the term sheet scheduled thereto, between the providers of the Surge Credit Facilities and Surge, a copy of which is included in the Surge Disclosure Letter.
(j) Approvals of Governmental Authorities: Each of AOC and Surge shall have obtained all consents, waivers, permissions and approvals necessary to complete the Arrangement by or from relevant Governmental Authorities, on terms and conditions satisfactory to the Parties, acting reasonably, including without limitation the Competition Act Approval.

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(k) No Actions: There shall be no action taken under any existing Applicable Law, nor any statute, rule, regulation or order which is enacted, enforced, promulgated or issued by any Governmental Authority, that:
(i) makes illegal or otherwise directly or indirectly restrains, enjoins or prohibits the Arrangement or any other transactions contemplated herein; or
(ii) results in a judgment or assessment of material damages directly or indirectly relating to the transactions contemplated herein.

The conditions in this Section 5.1 are for the mutual benefit of AOC and Surge and, with the exception of obtaining: (i) approval of the TSX under Section 5.1(g); (ii) the Competition Act Approval; (iii) the Interim Order and the Final Order; (iv) the AOC Shareholder approval of the AOC Arrangement Resolution; and (v) the Surge Shareholder approval of the Surge Issuance Resolution, may be waived, in whole or in part, by the Parties at any time. Notwithstanding the foregoing, the condition contained in Section 5.1(i) may be waived by AOC only with the unanimous approval of the AOC Board. If any of the foregoing conditions are not satisfied or waived on or before the Outside Date, then a Party may terminate this Agreement as provided in Section 8.1(a)(ii) (save and except for Section 4.3, Article 6, Article 9, Section 10.4 and Section 10.8 hereof which shall survive such termination and remain in full force and effect) by written notice to the Other Party in circumstances where the failure to satisfy any such condition is not the result, directly or indirectly, of such terminating Party’s breach of any term or condition of this Agreement.

5.2 Additional Conditions to Obligations of AOC

The obligation of AOC to consummate the transactions contemplated hereby, and in particular the Arrangement, is subject to the following conditions:

(a) Representations and Warranties: The representations and warranties of Surge set forth in this Agreement will be true and correct as of the Effective Date as if made on and as of such date (except to the extent such representations and warranties speak as of an earlier date, the accuracy of which will be determined as of that specified date), except where any inaccuracies of representations or warranties would not, either individually or in the aggregate, have a Material Adverse Effect on Surge (it being understood that, for purposes of determining accuracy of such representations and warranties, all “Material Adverse Effect”, “Material Adverse Change” and other materiality qualifications contained in such representations and warranties will be disregarded) and Surge will have provided to AOC a certificate of a senior officer certifying (without personal liability) such accuracy on the Effective Date, provided that Surge will be entitled to cure any breach of a representation and warranty within five (5) Business Days after receipt of written notice thereof from AOC (except that no cure period will be provided for a breach which by its nature cannot be cured and, in no event, will any cure period extend beyond the Outside Date).
(b) Covenants: Surge will have complied in all material respects with its covenants herein, except where the failure to comply in all respects with such covenants, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Surge and the Surge Subsidiary, taken as a whole, or would not reasonably be expected to significantly impede the ability of the Parties to complete the Arrangement, and Surge will have provided to AOC a certificate of a senior officer certifying (without personal liability) compliance with such covenants; provided that Surge will be entitled to cure any breach of a covenant within five (5) Business Days after receipt of written notice thereof from AOC (except that no cure period will be provided for a breach which by its nature cannot be cured and, in no event, will any cure period extend beyond the Outside Date).
(c) No Actions: No act, action, suit, proceeding, objection or opposition shall have been threatened or taken before or by any Governmental Authority or by any elected or appointed public official or private Person in Canada or elsewhere, whether or not having the force of law, and no law, regulation, policy, judgment, decision, order, ruling or directive (whether or not having the force of law) shall have been proposed, enacted, promulgated, amended or applied, which in the sole judgment of AOC, acting reasonably, in either case has had or, if the Arrangement was consummated, would result in a Material Adverse Change or have a Material Adverse Effect on Surge and the Surge Subsidiary, taken as a whole, or would, or would reasonably be expected to, materially impede the ability of the Parties to complete the Arrangement.
(d) Surge Board and Shareholder Authorization: Surge shall have furnished AOC with:
(i) certified copies of the resolutions duly passed by the Surge Board approving the entering into of this Agreement and the consummation of the transactions contemplated hereby; and
(ii) a certified copy of the Surge Issuance Resolution duly passed by Surge Shareholders at the Surge Meeting.
(e) No Material Adverse Change: Between the date hereof and the Effective Time, there shall not have occurred any Material Adverse Change with respect to Surge.
(f) Depositary: Surge shall have deposited the Consideration with the Depositary.
(g) Agreements: Surge shall have tabled duly executed copies of all agreements, documents and instruments required to be tabled by such Parties pursuant to the Plan of Arrangement.

The conditions in this Section 5.2 are for the exclusive benefit of AOC and may be waived by AOC in its sole discretion, in whole or in part, at any time and from time to time without prejudice to any other rights which AOC may have. If any of the foregoing conditions are not satisfied or waived on or before the Outside Date, AOC may, in addition to any other remedies it may have at law or equity, terminate this Agreement as provided in Section 8.1(a)(ii) (and save and except for Section 4.3, Article 6, Article 9, Section 10.4 and Section 10.8 hereof which shall survive

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such termination and remain in full force and effect) in circumstances where the failure to satisfy any such condition is not the result, directly or indirectly, of AOC’s breach of any term or condition of this Agreement.

5.3 Additional Conditions to Obligations of Surge

The obligation of Surge to consummate the transactions contemplated hereby, and in particular the Arrangement, is subject to the following conditions:

(a) Representations and Warranties:
(i) The representations and warranties in Sections 4.1(k)(i) as to the number of issued and outstanding AOC Shares, AOC Warrants and AOC Options shall be true and correct as of the date of this Agreement and the Effective Date as if made on such date, without being subject to any qualifier as to materiality (except, it being understood that the number of AOC Shares outstanding in Subsection 4.1(k)(i) may increase, and the number of AOC Options and AOC Warrants may each decrease, from the number outstanding on the date of this Agreement solely as a result of the “cashless exercise” of AOC Options and AOC Warrants in accordance with Section 2.5, but only to the extent that such securities are specifically described in Subsection 4.1(k)(i)), other than inaccuracies that are in the aggregate de minimis or result from rounding as a result of fractional entitlements upon such exercise of AOC Options and AOC Warrants; and
(ii) the remaining representations and warranties of AOC will be true and correct as of the Effective Date as if made on and as of such date (except to the extent such representations and warranties speak as of an earlier date, the accuracy of which will be determined as of that specified date), except where any inaccuracies of representations and warranties would not, either individually or in the aggregate, have a Material Adverse Effect on AOC (it being understood that, for purposes of determining accuracy of such representations and warranties, all “Material Adverse Effect”, “Material Adverse Change” and other materiality qualifications contained in such representations and warranties will be disregarded)

and AOC will have provided to Surge a certificate of a senior officer certifying (without personal liability) such accuracy on the Effective Date, provided that AOC will be entitled to cure any breach of a representation and warranty within five Business Days after receipt of written notice thereof from Surge (except that no cure period will be provided for a breach which by its nature cannot be cured and, in no event, will any cure period extend beyond the Outside Date).

(b) Covenants: AOC will have complied in all material respects with its covenants herein, except where the failure to comply in all respects with such covenants, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on AOC or would not reasonably be expected to significantly impede the ability of the Parties to complete the Arrangement, and AOC will have provided to Surge a certificate of a senior officer (without personal liability) certifying compliance with such covenants; provided that AOC will be entitled to cure any breach of a covenant within five (5) Business Days after receipt of written notice thereof from Surge (except that no cure period will be provided for a breach which by its nature cannot be cured and, in no event, will any cure period extend beyond the Outside Date).

(c) No Actions: No act, action, suit, proceeding, objection or opposition shall have been threatened or taken before or by any Governmental Authority or by any elected or appointed public official or private Person in Canada or elsewhere, whether or not having the force of law, and no law, regulation, policy, judgment, decision, order, ruling or directive (whether or not having the force of law) shall have been proposed, enacted, promulgated, amended or applied, which in the sole judgment of Surge, acting reasonably, in either case has had or, if the Arrangement was consummated, would result in a Material Adverse Effect on AOC, or would materially impede the ability of the Parties to complete the Arrangement.

(d) AOC Board and Shareholder Authorization: AOC shall have furnished Surge with:

(i) certified copies of the resolutions duly passed by the AOC Board approving the entering into of this Agreement and the consummation of the transactions contemplated hereby; and
(ii) a certified copy of the AOC Arrangement Resolution duly passed by AOC Shareholders at the AOC Meeting.
(e) Dissent Rights: The aggregate number of AOC Shares held by AOC Shareholders who have validly exercised and not withdrawn Dissent Rights shall not exceed 5% of the AOC Shares then outstanding, and AOC shall have provided to Surge a certificate of a senior officer certifying (without personal liability) such facts on the Effective Date with respect to AOC.
(f) No Material Adverse Change: Between the date hereof and the Effective Time, there shall not have occurred any Material Adverse Change with respect to AOC.
(g) AOC Options and AOC Warrants: Surge shall be satisfied, acting reasonably, that (i) all AOC Options and AOC Warrants have either been settled as set forth in this Agreement, as applicable, or terminated or Surge shall be otherwise satisfied, acting reasonably, that the AOC Options and AOC Warrants will no longer represent any right to acquire AOC Shares after giving effect to the Arrangement, and (ii) there are no other outstanding claims or rights or securities which could become claims or rights to AOC Shares, and AOC shall have provided to Surge a certificate of a senior officer certifying (without personal liability) such facts on the Effective Date.
(h) Resignations and Releases: Executed mutual resignations and releases in a form acceptable to Surge, acting reasonably, shall have been received by AOC and Surge on or prior to the Effective Date from each director of AOC and each other Person who has received an AOC Termination Payment.

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(i) Support and Hold Period Agreements: Surge shall be satisfied in its sole discretion that (i) there shall not have occurred any material breach by any AOC Lock-Up Shareholder or AOC D&O Shareholder of any of the restrictions on transfers of AOC Shares contained in any AOC Lock-Up Agreement or AOC D&O Support Agreement; and (ii) the AOC Closing Share Register is consistent with, and accurately reflects, any transfer of AOC Shares between an AOC Lock-Up Shareholder and another AOC Lock-Up Shareholder or an AOC D&O Shareholder which has been completed prior to the Effective Time.
(j) Agreements: AOC shall have tabled duly executed copies of all agreements, documents and instruments required to be tabled by such Parties pursuant to the Plan of Arrangement.

The conditions in this Section 5.3 are for the exclusive benefit of Surge and may be waived by Surge in its sole discretion, in whole or in part, at any time and from time to time without prejudice to any other rights which Surge may have. If any of the foregoing conditions are not satisfied or waived, Surge may, in addition to any other remedies it may have at law or equity, terminate this Agreement as provided in Section 8.1(a)(ii) (save and except for Section 4.3, Article 6, Article 9, Section 10.4 and Section 10.8 hereof which shall survive such termination and remain in full force and effect) in circumstances where the failure to satisfy any such condition is not the result, directly or indirectly, of Surge’s breach of this Agreement.

5.4 Notice and Effect of Failure to Comply with Conditions

Each of AOC and Surge shall give prompt notice to the other of the occurrence, or failure to occur, at any time from the date hereof to the Effective Date of any event or state of facts which occurrence or failure would, or would be likely to: (a) cause any of the representations or warranties of such Party contained herein to be untrue or inaccurate in any material respect; or (b) result in the failure to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by any Party hereunder; provided, however, that no such notification will affect the representations or warranties of the Parties or the conditions to the obligations of the Parties hereunder.

5.5 Satisfaction of Conditions

The conditions set forth in this Article 5 are conclusively deemed to have been satisfied, waived or released when, with the agreement of the Parties, the Articles of Arrangement are filed under the ABCA to give effect to the Arrangement.

ARTICLE 6 AGREEMENT AS TO DAMAGES AND OTHER ARRANGEMENTS

6.1 AOC Damages

If at any time after the execution of this Agreement and prior to its termination:

(a) the Surge Board: (i) fails to make any of the recommendations or determinations required to be made by Section 2.10; or (ii) withdraws modifies or changes any of the recommendations or determinations required to be made by Section 2.10;
(b) Section 5.2(f) is not satisfied on or before the Outside Date; or
(c) a breach of any representation or warranty or failure to perform any covenant or agreement on the part of Surge under this Agreement occurs that would cause any condition in Section 5.2(a) or Section 5.2(b) not to be satisfied, and such breach or failure is incapable of being cured or is not cured in accordance with the terms of such Section, as applicable; provided that any wilful breach shall be deemed to be incapable of being cured and provided that AOC is not then in breach of this Agreement so as to cause any condition in Section 5.3(a) or 5.3(b) not to be satisfied,

each of the above in this Section 6.1 being a “ AOC Damages Event ”, then in the event of the termination of this Agreement pursuant to Article 8, Surge shall pay to AOC (or to whom AOC may direct in writing) $4.35 million (the “ AOC Termination Amount ”) damages in consideration for the disposition of AOC’s rights under this Agreement in immediately available funds to an account designated by AOC within two (2) Business Days after the first to occur of such foregoing events. After an AOC Damages Event, but prior to payment of the AOC Termination Amount, Surge shall be deemed to hold such applicable payment in trust for AOC. For greater certainty, AOC is not entitled to more than one payment of the AOC Termination Amount pursuant to this Section 6.1.

6.2 Surge Damages

If at any time after the execution of this Agreement and prior to its termination:

(a) the AOC Board: (i) fails to make any of the recommendations or determinations referred to in Section 2.9; or (ii) withdraws, amends, changes or qualifies, or proposes publicly to withdraw, amend, change or qualify, in any manner adverse to Surge, any of its recommendations, approvals or determinations referred to in Section 2.9;
(b) the AOC Board shall have failed to publicly reaffirm any of its recommendations, approvals or determinations referred to in Section 2.9 in accordance with Section 3.4(e) or within five (5) Business Days of any written request to do so by Surge (or, in the event that the AOC Meeting to approve the Arrangement is scheduled to occur within such five (5) Business Days, prior to the scheduled date of such meeting);

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(c) a bona fide Acquisition Proposal (or bona fide intention to make an Acquisition Proposal) is publicly announced, proposed, offered or made to AOC or the AOC Shareholders prior to the date of the AOC Meeting and:
(i) remains outstanding at the time of the AOC Meeting;
(ii) the AOC Shareholders do not approve the AOC Arrangement Resolution or the AOC Arrangement Resolution is not submitted for their approval at the AOC Meeting; and
(iii) AOC accepts, recommends, approves or enters into an agreement to implement any Acquisition Proposal within 12 months of the date of this Agreement,
provided, however, that for the purposes of this Section 6.2(c), all references to “20%” in the definition of Acquisition Proposal shall be changed to “50%”;
(d) the AOC Board or any committee of the AOC Board accepts, recommends or approves, or AOC enters into an agreement with respect to, a Superior Proposal;
(e) AOC is in breach of any of its covenants or obligations in Section 3.4 in any material respect; or
(f) a breach of any representation or warranty or failure to perform any covenant or agreement on the part of AOC under this Agreement occurs that would cause any condition in Section 5.3(a) or Section 5.3(b) not to be satisfied, and such breach or failure is incapable of being cured or is not cured in accordance with the terms of such Section, as applicable; provided that any wilful breach shall be deemed to be incapable of being cured and provided that Surge is not then in breach of this Agreement so as to cause any condition in Section 5.2(a) or 5.2(b) not to be satisfied,

each of the above in this Section 6.2 being a “ Surge Damages Event ”, then in the event of the termination of this Agreement pursuant to Article 8, AOC shall pay to Surge (or to whom Surge may direct in writing) $4.35 million (the “ Surge Termination Fee ”) in consideration for the disposition of Surge’s rights under this Agreement in immediately available funds to an account designated by Surge within two Business Days after the first to occur of the events described above. After a Surge Damages Event, but prior to payment of the Surge Termination Fee, AOC shall be deemed to hold such applicable payment in trust for Surge. For greater certainty, Surge is not entitled to more than one payment of the Surge Termination Fee pursuant to this Section 6.2.

6.3 Liquidated Damages

Each Party acknowledges that the AOC Termination Amount and the Surge Termination Fee set forth in Sections 6.1 and 6.2, respectively, are: (i) a payment of liquidated damages which are a genuine pre-estimate of the damages which AOC or Surge, as the case may be, will suffer or incur as a result of the event giving rise to such damages and the resultant termination of this Agreement and is not a penalty; and (ii) represents consideration for the disposition to the payee of its rights under this Agreement. Each of the Parties irrevocably waives any right it may have to raise as a defence that any such liquidated damages are excessive or punitive. For greater certainty, the Parties agree that the payment of the amounts pursuant to Sections 6.1 and 6.2, respectively, is the sole monetary remedy of the respective Party receiving such payment; provided, however, that this limitation shall not apply in the event of fraud or intentional breach of this Agreement by either of the Parties. Nothing herein shall preclude a Party from seeking injunctive relief to restrain any breach or threatened breach of the covenants or agreements set forth in this Agreement, the Confidentiality Agreements or otherwise to obtain specific performance of any of such act, covenants or agreements, without the necessity of posting bond or security in connection therewith.

ARTICLE 7 AMENDMENT

7.1 Amendment

This Agreement may at any time and from time to time before or after the holding of the AOC Meeting or the Surge Meeting, be amended by written agreement of all of the Parties hereto without, subject to Applicable Law, further notice to or authorization on the part of their respective securityholders and any such amendment may, without limitation:

(a) change the time for performance of any of the obligations or acts of the Parties;
(b) waive any inaccuracies or modify any representation or warranty contained herein or in any document delivered pursuant hereto;
(c) waive compliance with or modify any of the covenants herein contained and waive or modify performance of any of the obligations of the Parties; or
(d) waive compliance with or modify any other conditions precedent contained herein; provided that no such amendment reduces or materially adversely affects the consideration to be received by a AOC Shareholder without approval by the affected securityholders given in the same manner as required for the approval of the Arrangement or as may be ordered by the Court.

7.2 Amendment of Plan of Arrangement

(a) Surge and AOC may by mutual agreement amend the Plan of Arrangement at any time and from time to time prior to the Effective Time, provided that each such amendment must be: (i) set forth in writing; (ii) filed with the Court and, if made following the AOC Meeting approved by the Court; and (iii) communicated to AOC Shareholders, if and as required by the Court.

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(b) Other than as may be required under the Interim Order, any amendment to the Plan of Arrangement may be proposed by AOC or Surge at any time prior to or at the AOC Meeting (provided that the Other Party shall have consented thereto) with or without any other prior notice or communication, and if so proposed and accepted by the Persons voting at the AOC Meeting, shall become part of the Plan of Arrangement for all purposes.
(c) Any amendment to the Plan of Arrangement that is approved by the Court following the AOC Meeting shall be effective only if it is consented to by each of Surge and AOC.

ARTICLE 8 TERMINATION

8.1 Termination

This Agreement may be terminated at any time prior to the Effective Date:

(i) by mutual written consent of AOC and Surge;
(ii) as provided in Sections 5.1, 5.2 and 5.3;
(iii) by AOC upon the occurrence of a AOC Damages Event as provided in Section 6.1;
(iv) by Surge upon the occurrence of a Surge Damages Event as provided in Section 6.2; and
(v) by AOC upon the occurrence of a Surge Damages Event as provided in Section 6.2(d) (in accordance with Section 3.4(b)(vii)) and provided AOC has complied with its obligations set forth in Section 3.4(d) and the payment by AOC to Surge of the Surge Termination Fee as required by Section 6.2 has been made.
(b) If this Agreement is terminated in accordance with the foregoing provisions of this Section 8.1, this Agreement shall forthwith become void and neither Party shall have any liability or further obligation to and of the Other Party hereunder except as provided in Section 4.3, Article 6, Article 9 and Sections 10.4 and 10.8 and each Party’s obligations under the Confidentiality Agreements, which shall survive such termination, and provided that neither the termination of this Agreement nor anything contained in this Subsection 8.1(b) shall relieve either Party from any liability for any breach by it of this Agreement, including from any inaccuracy in any of its representations and warranties and any non-performance by it of its covenants made herein, prior to the date of such termination.

ARTICLE 9 NOTICES

9.1 Notices

All notices that may or are required to be given pursuant to any provision of this Agreement are to be given or made in writing and served personally, delivered by overnight courier or sent by email transmission:

(a) in the case of Surge, to:

Surge Energy Inc. 2100, 635 – 8[th] Avenue S.W. Calgary, Alberta T2P 3L8

Email: [email protected]

Attention: Paul Colborne, President and Chief Executive Officer

with a copy to:

McCarthy Tétrault LLP 4000, 421 – 7[th] Avenue S.W. Calgary, Alberta T2P 4K9 Email: [email protected] Attention: Michael Bennett, Partner

(b) in the case of AOC, to:

Astra Oil Corp. 1410, 205 – 5[th] Avenue S.W. Calgary, Alberta T2P 2V7

Email: [email protected] Attention: Andrew Greenslade, President and Chief Executive Officer

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with a copy to: Burnet, Duckworth & Palmer LLP 2400, 525 – 8[th] Avenue S.W. Calgary, Alberta T2P 1G1

Email: [email protected] Attention: P.L. (Lonny) Tetley, Partner

or such other address as the Parties may, from time to time, advise the Other Party hereto by notice in writing. The date or time of receipt of any such notice will be deemed to be the date of delivery or facsimile transmission is received or a confirmation of receipt of email is received.

ARTICLE 10 GENERAL

10.1 Binding Effect

This Agreement shall be binding upon and enure to the benefit of the Parties hereto and their respective successors and permitted assigns.

10.2 Assignment

Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by either Party hereto without the prior written consent of the Other Party hereto.

10.3 Public Communications

Each of the Parties agree to consult with the Other Party prior to issuing any press releases or otherwise making public statements with respect to this Agreement or the Arrangement or making any filing with any Governmental Authority with respect thereto. Without limiting the generality of the foregoing, no Party shall issue any press release regarding the Arrangement, this Agreement or any transaction relating to this Agreement without first providing a draft of such press release to the Other Party and reasonable opportunity for comment; provided, however, that the foregoing shall be subject to each Party’s overriding obligation to make any such disclosure required in accordance with Applicable Laws. If such disclosure is required and the Other Party has not reviewed or commented on the disclosure, the Party making such disclosure shall use all commercially reasonable efforts to give prior oral or written notice to the Other Party, and if such prior notice is not possible, to give such notice promptly following such disclosure.

10.4 Costs

Except as otherwise expressly provided for in Article 6 and Section 3.3(d)(viii), all fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such cost or expense, whether or not the Arrangement is completed.

10.5 Severability

If any one or more of the provisions or parts thereof contained in this Agreement should be or become invalid, illegal or unenforceable in any respect, the remaining provisions or parts thereof contained herein shall be and shall be conclusively deemed to be severable therefrom and the validity, legality or enforceability of such remaining provisions or parts thereof shall not in any way be affected or impaired by the severance of the provisions or parts thereof severed. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible.

10.6 Further Assurances

Each of the Parties hereto shall, from time to time and at all times hereafter, at the request of the Other Party hereto, but without further consideration, do all such further acts, and execute and deliver all such further documents and instruments and provide all such further assurances as may be reasonably required in order to fully perform and carry out the terms and intent hereof.

10.7 Time of Essence

Time shall be of the essence of this Agreement.

10.8 Applicable Law and Enforcement

This Agreement shall be governed, including as to validity, interpretation and effect, by the Applicable Laws of the Province of Alberta and the Applicable Laws of Canada applicable therein. The Parties hereby irrevocably submit and attorn to the exclusive jurisdiction of the courts of the

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Province of Alberta in respect of all matters arising out of this Agreement. The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is, accordingly, agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the Province of Alberta having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity, subject to the provisions of this Agreement.

10.9 Waiver

Either Party may, on its own behalf only, (i) extend the time for the performance of any of the obligations or acts of the Other Party, (ii) waive compliance with the Other Party’s agreements or the fulfillment of any conditions to its own obligations contained herein, or (iii) waive inaccuracies in the Other Party’s representations or warranties contained herein or in any document delivered by the Other Party; provided, however, that any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of the Other Party and, unless otherwise provided in the written waiver, will be limited to the specific breach or condition waived.

10.10 Third Party Beneficiaries

The provision set forth in Section 2.8 is: (i) intended for the benefit of all such present directors and officers of AOC and shall be enforceable by each of such Persons and his or her heirs, executors, administrators and other legal Representatives (collectively, the “ AOC Third Party Beneficiaries ”) and AOC, Surge and any of their respective successors shall hold the rights and benefits of such section in trust for and on behalf of the AOC Third Party Beneficiaries and AOC, Surge and their respective successors hereby accept such trust and agree to hold the benefit of and enforce performance of such covenants on behalf of the AOC Third Party Beneficiaries; and (ii) in addition to, and not in substitution for, any other rights that the AOC Third Party Beneficiaries may have by contract or otherwise.

[ Remainder of page intentionally left blank. ]

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10.11 Counterparts

This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together constitute one and the same instrument.

IN WITNESS WHEREOF the Parties have executed this Agreement as of the date first above written.

Per: (signed) “Paul Colborne” Paul Colborne President & Chief Executive Officer Per: (signed) “Margaret Elekes” Margaret Elekes Senior Vice President Land & Business Development

ASTRA OIL CORP.

Per: (signed) “Andrew Greenslade” Andrew Greenslade President & Chief Executive Officer Per: (signed) “Mark Lobello” Mark Lobello Vice President, Finance & Chief Financial Officer

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EXHIBIT “A”

PLAN OF ARRANGEMENT UNDER SECTION 193

OF THE

BUSINESS CORPORATIONS ACT (ALBERTA)

ARTICLE 1 INTERPRETATION

1.1 In this Plan of Arrangement, the following terms have the following meanings:

(a) “ ABCA ” means the Business Corporations Ac t, Alberta R.S.A. 2000, c. B-9;
(b) “ Acquisitionco ” means a corporation to be incorporated under the ABCA prior to the Effective Time and a wholly-owned subsidiary of Surge;
(c) “ Amalco ” means the continuing corporation resulting from the amalgamation of Amalco1 and Surge pursuant to subsection 3.1(g);
(d) “ Amalco1 ” means the continuing corporation resulting from the amalgamation of Acquisitionco and AOC pursuant to subsection 3.1(e);
(e) “ Amalco1 Shares ” means the common shares in the capital of Amalco1;
(f) “ AOC ” means Astra Oil Corp., a corporation amalgamated pursuant to the ABCA;
(g) “ AOC Option Plan ” means the stock option plan of AOC in effect on the date hereof and the agreements entered into thereunder;
(h) “ AOC Options ” means options granted pursuant to the AOC Option Plan;
(i) “ AOC Shareholder Agreement ” means the shareholder agreement dated October 1, 2014 by and among AOC and certain of the AOC Shareholders;
(j) “ AOC Shares ” means the common shares in the capital of AOC;
(k) “ AOC Shareholders ” means the holders from time to time of AOC Shares;
(l) “ AOC Warrants ” means the performance warrants of AOC, each such AOC Warrant entitling the holder to acquire, upon payment of the exercise price thereunder, one (1) AOC Share pursuant to the terms of the warrant certificate representing such AOC Warrants;
(m) “ Arrangement ”, “ herein ”, “ hereof ”, “ hereto ”, “ hereunder ” and similar expressions mean and refer to the Arrangement made pursuant to section 193 of the ABCA set forth in this Plan of Arrangement as supplemented, modified or amended, and not to any particular article, section or other portion hereof;
(n) “ Arrangement Agreement ” means the arrangement agreement dated June 22, 2021 among AOC and Surge with respect to the Arrangement and all amendments thereto;
(o) “ Articles of Arrangement ” means the articles of arrangement in respect of the Arrangement required under subsection 193(10) of the ABCA to be filed with the Registrar after the Final Order has been made to give effect to the Arrangement;
(p) “ business day ” means any day, other than a Saturday, a Sunday and a statutory holiday in Calgary, Alberta;
(q) “ Certificate ” means the certificate or certificates or other confirmation of filing to be issued by the Registrar pursuant to subsection 193(11) of the ABCA giving effect to the Arrangement;
(r) “ Consideration ” means 3.1746 Surge Shares;
(s) “ Court ” means the Court of Queen’s Bench of Alberta;
(t) “ Depositary ” means the trust company to be designated by Surge and AOC;
(u) “ Dissent Rights ” means the right of an AOC Shareholder pursuant to section 191 of the ABCA and the Interim Order to dissent to the Arrangement and to be paid the fair value of the AOC Shares in respect of which the holder dissents, all in accordance with section 191 of the ABCA and the Interim Order;
(v) “ Dissenting Shareholders ” means the registered AOC Shareholders who validly exercise Dissent Rights and whose exercise of Dissent Rights remains valid immediately prior to the Effective Time and “ Dissenting Shareholder ” means any one of them;
(w) “ DRS Advice ” means a direct registration statement advice evidencing ownership of securities issued in lieu of a physical certificate;

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(x) “ Effective Date ” means the date the Arrangement is effective under the ABCA;
(y) “ Effective Time ” means the time at which the Articles of Arrangement are filed with the Registrar on the Effective Date;
(z) “ Encumbrances ” means any mortgage, hypothec, prior claim, encumbrance, pledge, assignment for security, security interest, guarantee, right of third parties or other charge or any collateral securing the payment obligations of any person, as well as any other agreement or arrangement with any similar effect whatsoever;
(aa) “ Exchanging Shareholders ” means AOC Shareholders who at all relevant times are not Non-Resident Shareholders or Dissenting Shareholders;
(bb) “ Final Order ” means the final order of the Court approving this Arrangement under subsection 193(9) of the ABCA, as such order may be affirmed, amended or modified by any court of competent jurisdiction;
(cc) “ Interim Order ” means the interim order of the Court made under subsection 193(4) of the ABCA containing declarations and directions with respect to this Arrangement, as such order may be affirmed, amended or modified by any court of competent jurisdiction;
(dd) “ Letter of Transmittal ” means the Letter of Transmittal enclosed with the joint information circular of AOC and Surge pursuant to which an AOC Shareholder (other than a Dissenting Shareholder) is required to deliver the certificate(s), if any, representing the AOC Shares held by such AOC Shareholder in order to receive the Consideration to which such AOC Shareholder is entitled to receive under the Plan of Arrangement;
(ee) “ Meeting ” means the special meeting of holders of AOC Shares to be held to consider the Arrangement, and any adjournment(s) or postponement(s) thereof;
(ff) “ Non-Resident Shareholder ” means an AOC Shareholder that is: (i) a person who is not a resident of Canada for the purposes of the Tax Act; or (ii) a partnership that is not a “Canadian partnership” as defined in the Tax Act;
(gg) “ Registrar ” means the Registrar of Corporations appointed under section 263 of the ABCA;
(hh) “ Surge ” means Surge Energy Inc., a corporation amalgamated pursuant to the ABCA;
(ii) “ Surge Shares ” means, unless the context requires otherwise, prior to the amalgamation of Surge and Amalco1, the common shares of Surge, as constituted on the date hereof, and following the amalgamation of Surge and Amalco1, the common shares of Amalco; and
(jj) “ Tax Act ” means the Income Tax Act (Canada), R.S.C. 1985, c.l. (5[th] Supp).
1.2 The division of this Plan of Arrangement into articles and sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Plan of Arrangement.
1.3 Unless reference is specifically made to some other document or instrument, all references herein to Articles, Sections, subsections, paragraphs and subparagraphs are to articles, sections, subsections, paragraphs and subparagraphs of this Plan of Arrangement.
1.4 Unless the context otherwise requires, words importing the singular number shall include the plural and vice versa; words importing any gender shall include all genders; and words importing persons shall include individuals, partnerships, associations, corporations, funds, unincorporated organizations, governments, regulatory authorities, and other entities.
1.5 In the event that the date on which any action is required to be taken hereunder by any of the parties is not a business day in the place where the action is required to be taken, such action shall be required to be taken on the next succeeding day which is a business day in such place.
1.6 References in this Plan of Arrangement to any statute or sections thereof shall include such statute as amended or substituted and any regulations promulgated thereunder from time to time in effect.
1.7 Unless otherwise specified, all references to “dollars” or “$” shall mean Canadian dollars.

ARTICLE 2 ARRANGEMENT AGREEMENT

2.1 This Plan of Arrangement is made pursuant and subject to the provisions of the Arrangement Agreement.
2.2 The Arrangement, upon the filing of the Articles of Arrangement and the issuance of the Certificate, will become effective at, and be binding on and after, the Effective Time on: (i) the AOC Shareholders (including the Dissenting Shareholders); (ii) AOC; (iii) Surge; (iv) Acquisitionco; (v) the Depositary; and (vi) all other persons.
2.3 The Articles of Arrangement and the Certificate shall be filed and issued, respectively, with respect to the Arrangement in its entirety. The Certificate shall be conclusive evidence that the Arrangement has become effective.
2.4 No portion of this Plan of Arrangement shall take effect with respect to any party or person until the Effective Time.

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ARTICLE 3 ARRANGEMENT

3.1 Commencing at the Effective Time, each of the events set out below shall occur and shall be deemed to occur in the following order without any further act or formality except as otherwise provided herein:
(a) the AOC Shareholder Agreement shall be terminated and of no further force or effect;
(b) all outstanding securities convertible, exchangeable or exercisable for AOC Shares, including without limitation all AOC Options and all AOC Warrants shall be cancelled and cease to represent a right or claim of any kind or nature and the AOC Option Plan and any certificates representing AOC Warrants, as the case may be, shall be terminated and of no further force or effect;
(c) each AOC Share held by a Dissenting Shareholder shall be deemed to be transferred to Surge (free and clear of any Encumbrances) and each Dissenting Shareholder shall cease to have any rights as an AOC Shareholder, other than the right to be paid the fair value of such Dissenting Shareholder’s AOC Shares so transferred to Surge, in accordance with Article 4 of this Plan of Arrangement and the Dissent Rights (and: (i) the name of each Dissenting Shareholder shall be deemed to have been removed from the register of holders of AOC Shares as it relates to each AOC Share so transferred; and (ii) Surge shall be deemed to have been added to the register of AOC Shareholders as it relates to each AOC Share so transferred to Surge by each Dissenting Shareholder);
(d) each AOC Share held by an Exchanging Shareholder shall be, and shall be deemed to be, transferred to Surge (free and clear of any Encumbrances) and such Exchanging Shareholder shall cease to have any rights as an AOC Shareholder and, in exchange therefor, such Exchanging Shareholder shall receive (and for greater certainty, Surge shall issue) the Consideration in respect of each AOC Share so transferred to Surge (and: (i) the name of such Exchanging Shareholder shall be deemed to have been: (A) removed from the register of holders of AOC Shares as it relates to each AOC Share so transferred; and (B) added to the register of holders of Surge Shares as it relates to the Consideration so received by such Exchanging Shareholder; and (ii) Surge shall be deemed to have been added to the register of holders of AOC Shares as it relates to each AOC Share so transferred to Surge by an Exchanging Shareholder);
(e) Acquisitionco and AOC shall be amalgamated to form Amalco1 and continue as one corporation under the ABCA in accordance with the following:
- (i) the name of Amalco1 shall be “Š”;
- (ii) the articles of Acquisitionco shall be deemed to be the articles of Amalco1;
- (iii) the registered office of Amalco1 shall be the registered office of Acquisitionco;
- (iv) the first directors of Amalco1, who shall hold office until the next annual meeting of shareholders of Amalco1 or until their successors are elected or appointed, shall be the directors of Acquisitionco;
- (v) the by-laws of Amalco1 shall be the by-laws of Acquisitionco in effect prior to the Effective Time;
- (vi) the property of each of Acquisitionco and AOC shall continue to be the property of Amalco1;
- (vii) Amalco1 shall continue to be liable for the obligations of Acquisitionco and AOC;
- (viii) an existing cause of action, claim or liability to prosecution of AOC and Acquisitionco shall be unaffected;
- (ix) a civil, criminal or administrative action or proceeding pending by or against Acquisitionco or AOC may be continued to be prosecuted by or against Amalco1;
- (x) a conviction against, or ruling, order or judgment in favour of or against, Acquisitionco or AOC may be enforced by or against Amalco1;
- (xi) the articles of amalgamation of Amalco1 shall be deemed to be the articles of incorporation of Amalco1 and the certificate of amalgamation of Amalco1 shall be deemed to be the certificate of incorporation of Amalco1;
- (xii) upon the amalgamation of Acquisitionco and AOC, at the Effective Time:
  - (A) each AOC Share held by a Non-Resident Shareholder (other than, for greater certainty, any AOC Shares transferred to Surge by an Non-Resident Shareholder who is a Dissenting Shareholder pursuant to Section 3.1(c)) shall be, and shall be deemed to be, cancelled and such Non-Resident Shareholder shall cease to have any rights as an AOC Shareholder and, in consideration therefor, such Non-Resident Shareholder shall receive (and for greater certainty, Surge shall issue) the Consideration in respect of each AOC Share so cancelled (and the name of such Non-Resident Shareholder shall be deemed to have been: (i) removed from the register of holders of AOC Shares as it relates to the AOC Shares so cancelled; and (ii) added to the register of holders of Surge Shares as it relates to the Consideration so received by such Non-Resident Shareholder);
  - (B) each AOC Share held by Surge shall be, and shall be deemed to be, cancelled and, in exchange therefor, Surge shall receive one (1) common share of Amalco1 in respect of each AOC Share so cancelled (and Surge shall be deemed to have been added to the register of holders of common shares of Amalco1 as it relates to the common shares of Amalco1 so received by Surge); and

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     - (C) each common share of Acquisitionco shall be, and shall be deemed to be, cancelled and, in exchange therefor, Surge shall receive one common share of Amalco1 in respect of each common share of Acquisitionco so cancelled (and Surge shall be deemed to have been added to the register of holders of common shares of Amalco1 as it relates to the common shares of Amalco1 so received by Surge);

(f) the stated capital account with respect to the Amalco1 Shares shall be reduced to $1.00 without payment of any consideration;
(g) Surge and Amalco1 shall amalgamate pursuant to the provisions of section 184(1) of the ABCA and continue as one corporation in accordance with the following:
- (i) the name of Amalco shall be “Surge Energy Inc.”;
- (ii) the articles of Surge shall be deemed to be the articles of Amalco;
- (iii) the registered office of Amalco shall be the registered office of Surge;
- (iv) the first directors of Amalco, who shall hold office until the next annual meeting of shareholders of Amalco or until their successors are elected or appointed, shall be the directors of Surge;
- (v) the first officers of Amalco, who shall hold office until their successors are appointed, shall be the officers of Surge and all of the officers of AOC shall cease to be officers as of the Effective Time and shall not be officers of Amalco;
- (vi) the by-laws of Amalco shall be the by-laws of Surge in effect prior to the Effective Time;
- (vii) the property of each of Amalco1 and Surge shall continue to be the property of Amalco;
- (viii) Amalco shall continue to be liable for the obligations of Amalco1 and Surge;
- (ix) an existing cause of action, claim or liability to prosecution of Surge and Amalco1 shall be unaffected;
- (x) a civil, criminal or administrative action or proceeding pending by or against Amalco1 or Surge may be continued to be prosecuted by or against Amalco;
- (xi) a conviction against, or ruling, order or judgment in favour of or against, Amalco1 or Surge may be enforced by or against Amalco;
- (xii) the articles of amalgamation of Amalco shall be deemed to be the articles of incorporation of Amalco and the certificate of amalgamation of Amalco is deemed to be the certificate of incorporation of Amalco; and
- (xiii) on the amalgamation of Surge and Amalco1, at the Effective Time:
  - (A) each Amalco1 Share shall be, and shall be deemed to be, cancelled without any repayment of capital; and
  - (B) each Surge Share shall survive and shall continue to be an issued and outstanding common share of Amalco, without amendment.
3.2 Each Exchanging Shareholder whose AOC Shares are transferred to Surge pursuant to Section 3.1(d) shall be entitled to make a tax election, pursuant to subsection 85(1) or 85(2) of the Tax Act, as applicable (and the analogous provisions of provincial income tax law). Surge shall make available on Surge’s website tax election forms required under the Tax Act within 60 days of the Effective Date. Any Exchanging Shareholder who wants to make such election and otherwise qualifies to make such election may do so by providing to Surge two signed copies of the necessary election forms within 120 days following the Effective Date, duly completed with the details of the number of AOC Shares transferred and the applicable agreed amount or amounts for the purposes of such election; provided that such agreed amounts shall be within the limits set out in the Tax Act. Thereafter, subject to the election forms complying with the provisions of the Tax Act (or applicable provincial or territorial income tax law), the forms will be signed by Surge and returned to such Exchanging Shareholder by ordinary mail within 60 days after the receipt thereof by Surge for filing with the Canada Revenue Agency (or the applicable provincial or territorial taxing authority). Surge will not be responsible for the proper completion of any election form except for the obligation of Surge to so sign and return duly completed election forms which are received by Surge within 120 days of the Effective Date. Surge will not be responsible for any taxes, interest or penalties resulting from the failure by an Exchanging Shareholder to properly complete or file the election forms in the form and manner and within the time prescribed by the Tax Act (or any applicable provincial or territorial legislation). In its sole discretion, Surge may choose to sign and return an election form received by it more than 120 days following the Effective Date, but Surge will have no obligation to do so.
3.3 The parties shall, forthwith following the Effective Time, make the appropriate entries into their securities registers to reflect the matters referred to under Section 3.1.

ARTICLE 4 DISSENTING SHAREHOLDERS

4.1 Each registered holder of AOC Shares shall have the right to dissent with respect to the Arrangement in accordance with the provisions of section 191 of the ABCA as modified by the Interim Order. A Dissenting Shareholder shall, at the Effective Time, cease to have any rights as a holder of AOC Shares and shall only be entitled to be paid the fair value of the holder’s AOC Shares. A

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Dissenting Shareholder who is paid the fair value of the holder’s AOC Shares shall be deemed to have transferred the holder’s AOC Shares to Surge for cancellation at the Effective Time, notwithstanding the provisions of section 191 of the ABCA. A Dissenting Shareholder who for any reason is not entitled to be paid the fair value of the holder’s AOC Shares shall be treated as if the holder had participated in the Arrangement on the same basis as a non-dissenting holder of AOC Shares notwithstanding the provisions of section 191 of the ABCA. The fair value of the AOC Shares shall be determined as of the close of business on the last business day before the day on which the Arrangement is approved by the holders of AOC Shares at the Meeting; but in no event shall AOC or Surge be required to recognize such Dissenting Shareholders as shareholders of AOC or Surge after the Effective Time and the names of such holders shall be removed from the applicable register of shareholders as at the Effective Time. For greater certainty, in addition to any other restrictions in section 191 of the ABCA, no person who has voted in favour of the Arrangement shall be entitled to dissent with respect to the Arrangement.

ARTICLE 5 OUTSTANDING CERTIFICATES AND FRACTIONAL SECURITIES

5.1 From and after the Effective Time, certificates formerly representing AOC Shares shall represent only the right to receive the Consideration to which the holders are entitled under the Arrangement, or as to those held by Dissenting Shareholders to receive the fair value of the AOC Shares represented by such certificates.
5.2 Prior to the Effective Time, Surge shall have issued and delivered to the Depositary an irrevocable treasury order authorizing the Depositary, as the registrar and transfer agent for the Surge Shares, to issue in a book based register the aggregate number of Surge Shares issuable to the former holders of AOC Shares pursuant to this Plan of Arrangement. Following the Effective Time, the Depositary shall be considered to hold the Surge Shares for the sole benefit of the AOC Shareholders.
5.3 The Depositary shall (as soon as is practicable but in any event not later than the date that is three (3) business days following the later of the Effective Date and the date of deposit by a former AOC Shareholder of a duly completed and executed Letter of Transmittal, together, if applicable, with the share certificates representing the holder’s AOC Shares and such other documents and instruments as the Depositary may reasonably require) cause to be delivered to such holder certificates or DRS Advices representing the Surge Shares (or arrange for the direct non-certificated deposit of the Surge Shares). Such Surge Shares shall be forwarded by first class mail, postage pre-paid, to the person and at the address specified in the relevant Letter of Transmittal or, if no address has been specified therein, at the address specified for the particular holder in the register of holders of AOC Shares. Surge Shares mailed pursuant hereto will be deemed to have been delivered at the time of delivery thereof to the post office.
5.4 If any certificate which immediately prior to the Effective Time represented an interest in outstanding AOC Shares that were exchanged or cancelled, as applicable, pursuant to Section 3.1 has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to have been lost, stolen or destroyed, the Depositary will issue and deliver in exchange for such lost stolen or destroyed certificate the Consideration to which the holder is entitled pursuant to the Arrangement as determined in accordance with the Arrangement. The person who is entitled to receive such Consideration shall, as a condition precedent to the receipt thereof, give a bond to Surge and its transfer agent in form and substance satisfactory to Surge or shall otherwise indemnify Surge and the Depositary against any claim that may be made against any of them with respect to the certificate alleged to have been lost, stolen or destroyed.
5.5 Any certificate formerly representing AOC Shares that is not deposited with all other documents as required by this Plan of Arrangement and the Letter of Transmittal on or before the last business day prior to the third anniversary of the Effective Date shall cease to represent a right or claim of any kind or nature, including the right of the holder of such AOC Shares to receive the Consideration that the holder is entitled pursuant to this Arrangement. In such case, the applicable Surge Shares shall be returned to Surge for cancellation.
5.6 No certificates representing fractional Surge Shares shall be issued. In lieu of any fractional Surge Shares, each former AOC Shareholder otherwise entitled to a fractional interest in a Surge Share will receive, without any additional compensation, the nearest whole number of Surge Shares. In calculating such fractional interests, all AOC Shares registered in the name of an AOC Shareholder or its nominee shall be aggregated.
5.7 Surge, Amalco, Amalco1, AOC and the Depositary shall be entitled to deduct and withhold from any Consideration otherwise payable or deliverable to any holder of AOC Shares or, as to AOC Shares held by a Dissenting Shareholder, the fair value payable or deliverable in respect of the Dissenting Shareholder’s AOC Shares, such amounts as any of Surge, Amalco, Amalco1, AOC or the Depositary determines, acting reasonably, may be required to be deducted or withheld with respect to such payment under the Tax Act or any provision of federal, provincial, territorial, state, local or foreign tax law. To the extent that amounts are so deducted or withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to the holder of the securities in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority. Surge, Amalco, Amalco1, AOC and the Depositary are each hereby authorized to sell or otherwise dispose of such portion of the Consideration as is necessary to provide sufficient funds to Surge, Amalco, Amalco1, AOC and the Depositary, as the case may be, to enable it to comply with such deduction or withholding requirement, and Surge, Amalco, Amalco1, AOC and the Depositary shall notify the holder thereof and remit any unapplied balance of the net proceeds of such sale to such holder.

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ARTICLE 6 AMENDMENTS

6.1 Surge and AOC may amend, modify and/or supplement this Plan of Arrangement at any time and from time to time prior to the Effective Time, provided that each such amendment, modification and/or supplement must be: (a) set out in writing; (b) filed with the Court and, if made following the Meeting, approved by the Court; and (c) communicated to the AOC Shareholders if and as required by the Court.
6.2 Any amendment, modification or supplement to this Plan of Arrangement may be proposed by Surge and AOC at any time prior to or at the Meeting (provided that the other party shall have consented thereto) with or without any other prior notice or communication, and if so proposed and accepted by the persons voting at the Meeting (other than as may be required under the Interim Order), shall become part of this Plan of Arrangement for all purposes.
6.3 Any amendment, modification or supplement to this Plan of Arrangement that is approved by the Court following the Meeting shall be effective only if: (a) it is consented to by each of Surge and AOC; and (b) if required by the Court or applicable law, it is consented to by the AOC Shareholders.

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EXHIBIT “B” AOC ARRANGEMENT RESOLUTION

BE IT RESOLVED AS A SPECIAL RESOLUTION OF THE HOLDERS OF COMMON SHARES OF ASTRA OIL CORP. (“ AOC ”) THAT:

the arrangement under Section 193 of the Business Corporations Act (Alberta) involving, among others, AOC, the holders of the common shares of AOC and Surge Energy Inc. (the “ Arrangement ”), substantially as set forth in the plan of arrangement (the “ Plan of Arrangement ”) attached as Appendix Š to the joint information circular of AOC and Surge dated Š, 2021 (the “ Information Circular ”) accompanying the notices of meeting for each of AOC and Surge, and all transactions contemplated thereby are hereby authorized, approved, ratified and confirmed;
notwithstanding that this resolution has been duly passed and/or has received the approval of the Court of Queen’s Bench of Alberta, the board of directors of AOC may, without further notice to or approval of the securityholders of AOC, subject to the terms of the Arrangement, (i) amend or terminate the arrangement agreement dated June Š, 2021 between Surge and AOC or the Plan of Arrangement, or (ii) revoke this resolution at any time prior to the filing of articles of arrangement giving effect to the Arrangement;
any director or officer of AOC is hereby authorized, for and on behalf of AOC, to execute and deliver articles of arrangement and to execute, with or without the corporate seal, and, if appropriate, deliver all other documents and instruments and to do all other things as in the opinion of such director or officer may be necessary or desirable to implement this resolution and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of any such document or instrument, and the taking of any such action; and
all actions heretofore taken by or on behalf of AOC in connection with any matter referred to in any of the foregoing resolutions which were in furtherance of the Arrangement are hereby approved, ratified and confirmed in all respects.

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EXHIBIT “C” SURGE ISSUANCE RESOLUTION

BE IT RESOLVED AS AN ORDINARY RESOLUTION OF THE HOLDERS OF COMMON SHARES OF SURGE ENERGY INC. ( “ SURGE ”) THAT:

the issuance of up to Š common shares (“ Surge Shares ”) in the capital of Surge in exchange for common shares (“ AOC Shares ”) in the capital of Astra Oil Corp. (“ AOC ”) (including up to 5,000 additional Surge Shares that may be required to be issued to account for clerical and administrative matters, including the rounding for fractional shares), pursuant to the arrangement under Section 193 of the Business Corporations Act (Alberta) involving, among others, AOC and the holders of AOC Shares and Surge (the “ Arrangement ”), substantially as set forth in the plan of arrangement (the “ Plan of Arrangement ”) attached as an Appendix Š to the joint information circular of AOC and Surge dated Š, 2021 (the “ Information Circular ”) accompanying the notice of meeting for each of AOC and Surge is hereby authorized and confirmed;
notwithstanding that this resolution has been duly passed, the board of directors of Surge may, without further notice to or approval of the securityholders of Surge, subject to the terms of the Arrangement, (i) amend or terminate the arrangement agreement dated June Š, 2021 between Surge and AOC or the Plan of Arrangement, or (ii) revoke this resolution at any time prior to the filing of articles of arrangement giving effect to the Arrangement;
any director or officer of Surge is hereby authorized, for and on behalf of Surge, to execute and deliver articles of arrangement and to execute, with or without the corporate seal, and, if appropriate, deliver all other documents and instruments and to do all other things as in the opinion of such director or officer may be necessary or desirable to implement this resolution and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of any such document or instrument, and the taking of any such action; and
all actions heretofore taken by or on behalf of Surge in connection with any matter referred to in any of the foregoing resolutions which were in furtherance of the Arrangement are hereby approved, ratified and confirmed in all respects.

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APPENDIX E

INTERIM ORDER

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COURT FILE 2101-08200 NUMBER COURT COURT OF QUEEN’S BENCH OF ALBERTA JUDICIAL CENTRE CALGARY MATTER IN THE MATTER OF SECTION 193 OF THE BUSINESS CORPORATIONS ACT , RSA 2000, c B-9, AS AMENDED

AND IN THE MATTER OF A PROPOSED ARRANGEMENT INVOLVING, INTER ALIA, ASTRA OIL CORP., SURGE ENERGY INC. AND THE SHAREHOLDERS OF ASTRA OIL CORP.

APPLICANT ASTRA OIL CORP. RESPONDENT Not Applicable DOCUMENT INTERIM ORDER ADDRESS FOR Burnet, Duckworth & Palmer LLP SERVICE AND 2400, 525 – 8 Avenue SW CONTACT Calgary, Alberta T2P 1G1 INFORMATION OF Lawyer: Ryan Algar PARTY FILING THIS Phone Number: (403) 260-0126 DOCUMENT Fax Number: (403) 260-0332 Email Address: [email protected] File No. 072559-21/REA

DATE ON WHICH ORDER WAS PRONOUNCED: July 15, 2021 NAME OF JUDGE WHO MADE THIS ORDER: Justice K.M. Horner LOCATION OF HEARING: Calgary, Alberta

UPON the Originating Application (the “ Originating Application ”) of Astra Oil Corp. (the “ Applicant ”);

AND UPON reading the Originating Application, the Affidavit of Andrew Greenslade, President and Chief Executive Officer of the Applicant, sworn July 15, 2021 (the “ Affidavit ”) and the documents referred to therein;

AND UPON HEARING counsel for the Applicant;

FOR THE PURPOSES OF THIS ORDER:

(a) the capitalized terms not defined in this Order (the “ Order ”) shall have the meanings attributed to them in the draft information circular (the “ Information Circular ”) of the Applicant and Surge Energy Inc. (“ Surge ”), which is attached as Exhibit A to the Affidavit; and
(b) all references to “Arrangement” used herein mean the arrangement as set forth in the plan of arrangement attached as Exhibit “A” to the arrangement agreement dated June 22, 2021 (the “ Arrangement Agreement ”), which Arrangement Agreement is attached as Appendix D to the Information Circular.

IT IS HEREBY ORDERED THAT:

General

The Applicant shall seek approval of the Arrangement as described in the Information Circular by the holders (the “ AOC Shareholders ”) of common shares of the Applicant (“ AOC Shares ”) in the manner set forth below.

The AOC Meeting

The Applicant shall call and conduct a special meeting (the “ AOC Meeting ”) of AOC Shareholders on or about August 17, 2021. At the AOC Meeting, the AOC Shareholders will consider and vote upon, amongst other things, a resolution to approve the Arrangement substantially in the form attached as Appendix A to the Information Circular (the “ Arrangement Resolution ”) and such other business as may properly be brought before the AOC Meeting or any adjournment or postponement thereof, all as more particularly described in the Information Circular.
A quorum at the AOC Meeting shall be two persons present holding or representing not less than five percent of the outstanding AOC Shares entitled to be voted at the AOC Meeting. If a quorum is not present at the opening of the AOC Meeting, the AOC Shareholders present or represented may adjourn the AOC Meeting to a fixed time and place but may not transact any other business. No notice of the adjourned AOC Meeting shall be required and, if at such adjourned meeting a quorum is not present, the AOC Shareholders present in person or by proxy at such adjourned meeting shall be a quorum for all purposes.
Each AOC Share entitled to be voted at the AOC Meeting will entitle the holder to one vote at the AOC Meeting in respect of the Arrangement Resolution.
The record date for AOC Shareholders entitled to receive notice of and vote at the AOC Meeting shall be July 13, 2021 (the “ Record Date ”). Only AOC Shareholders of record as at the Record Date are entitled to receive notice of the AOC Meeting. AOC Shareholders of record will be entitled to vote those AOC Shares included in the list of AOC Shareholders prepared as at the Record Date. If an AOC Shareholder transfers AOC Shares after the Record Date and the transferee of those AOC Shares, having produced properly endorsed certificates evidencing such AOC Shares or having otherwise established that the transferee owns such AOC Shares, demands, at least 10 days before the AOC Meeting, that the transferee’s name be included in the list of AOC Shareholders entitled to vote at the AOC Meeting, such transferee shall be entitled to vote such AOC Shares at the AOC Meeting.
The AOC Meeting shall be called, held and conducted in accordance with the applicable provisions of the ABCA, the articles and by-laws of the Applicant in effect at the relevant time, the Information Circular, the rulings and directions of the Chair of the AOC Meeting, this Order and any further Order of this Honourable Court. To the extent that there is any inconsistency or discrepancy between this Order and the ABCA or the articles or by-laws of the Applicant, the terms of this Order shall govern.

Conduct of the AOC Meeting

The Chair of the AOC Meeting shall be any officer or director of the Applicant.
The only persons entitled to attend the AOC Meeting shall be AOC Shareholders or their authorized proxy holders, the Applicant’s directors and officers and its auditors, the Applicant’s legal counsel, the representatives and legal counsel of other parties to the Arrangement and such other persons who may be permitted to attend by the Chair of the AOC Meeting.
The number of votes required to pass the Arrangement Resolution shall be not less than 66[2/3] % of the votes cast by AOC Shareholders present either in person or by proxy at the AOC Meeting.
To be valid, a proxy must be deposited with Computershare Trust Company of Canada in the manner described in the Information Circular.
The accidental omission to give notice of the AOC Meeting or the non-receipt of the notice shall not invalidate any resolution passed or proceedings taken at the AOC Meeting.
Subject to paragraph 3, the Applicant is authorized to adjourn or postpone the AOC Meeting on one or more occasions (whether or not a quorum is present, if applicable) and for such period or periods of time as the Applicant deems advisable, without the necessity of first convening the AOC Meeting or first obtaining any vote of the AOC Shareholders in respect of the adjournment or postponement. Notice of such adjournment or postponement may be given by such method as the Applicant determines is appropriate in the circumstances. If the AOC Meeting is adjourned or postponed in accordance with this Order, the references to the AOC Meeting in this Order shall be deemed to be the AOC Meeting as adjourned or postponed, as the context allows.

Amendments to the Arrangement

The Applicant is authorized to make such amendments, revisions or supplements to the Arrangement as it and Surge may together determine necessary or desirable, provided that such amendments, revisions or supplements are made in accordance with and in the manner contemplated by the Arrangement and the Arrangement Agreement. The Arrangement so amended, revised or supplemented shall be deemed to be the Arrangement submitted to the AOC Meeting and the subject of the Arrangement Resolution, without needing to return to this Honourable Court to amend this Order.

Amendments to Meeting Materials

The Applicant is authorized to make such amendments, revisions or supplements (“ Additional Information ”) to the Information Circular, form of proxy (“ Proxy ”), Notice of the Meeting (“ Notice of Meeting ”), form of letter of transmittal (“ Letter of Transmittal ”) and notice of Application (“ Notice of Application ”) as it may determine, and the Applicant may disclose such Additional Information, including material changes, by the method and in the time most reasonably practicable in the circumstances, as determined by the Applicant. Without limiting the generality of the foregoing, if any material change or material fact arises between the date of this Order and the date of the AOC Meeting, which change or fact, if known prior to mailing of the Information Circular, would have been disclosed in the Information Circular, then:
(a) the Applicant shall advise the AOC Shareholders of the material change or material fact by disseminating a news release (a “ News Release ”) or sending a letter to the AOC Shareholders via e-mail or mail (a “ Letter ” and together with the News Release, “ Notice ”) in accordance with applicable Canadian securities laws; and
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(b) provided that the Notice describes the applicable material change or material fact in reasonable detail, the Applicant shall not be required to deliver an amendment to the Information Circular to the AOC Shareholders or otherwise give notice to the AOC Shareholders of the material change or material fact other than the dissemination of the Notice as aforesaid.

Solicitation of Proxies

The Applicant is authorized to use the proxies enclosed with the Information Circular, subject to its ability to insert dates and other relevant information in the final form of such proxy. The Applicant is authorized, at its expense, to solicit proxies, directly and through its officers, directors and employees, and through such agents or representatives as it may retain for that purpose, and such solicitation may be by mail or such other forms of personal and electronic communication as they may determine.

Dissent Rights

The AOC Shareholders are, subject to the provisions of this Order and the Arrangement, accorded the right to dissent under Section 191 of the ABCA with respect to the Arrangement Resolution and the right to be paid the fair value of their AOC Shares by Surge in respect of which such right to dissent was validly exercised.
In order for a registered AOC Shareholder (a “ Dissenting Shareholder ”) to exercise such right to dissent under Section 191 of the ABCA:
(a) notwithstanding subsection 191(5) of the ABCA, the Dissenting Shareholder’s written objection to the Arrangement Resolution must be received by the Applicant, care of its solicitors, Burnet, Duckworth & Palmer LLP, 2400, 525 – 8[th] Avenue SW, Calgary, Alberta, T2P 1G1, Attention: Ryan Algar, not later than 4:00 p.m. (Calgary time) on the day that is two Business Days immediately preceding the date of the AOC Meeting;
(b) a vote against the Arrangement Resolution, whether in person or by proxy, shall not constitute a written objection to the Arrangement Resolution as required under clause 20(a) herein;
(c) a Dissenting Shareholder shall not have voted his or her AOC Shares at the AOC Meeting, either by proxy or in person, in favour of the Arrangement Resolution;
(d) an AOC Shareholder may not exercise the right to dissent in respect of only a portion of the holder’s AOC Shares, but may dissent only with respect to all of the AOC Shares held by the AOC Shareholder; and
(e) the exercise of such right to dissent must otherwise comply with the requirements of Section 191 of the ABCA as modified and supplemented by this Order and the Arrangement.
The fair value of the consideration to which a Dissenting Shareholder is entitled pursuant to the Arrangement shall be determined as of the close of business on the last Business Day before the day on which the Arrangement Resolution is approved by the AOC Shareholders and shall be paid to the Dissenting Shareholders by Surge as contemplated by the Arrangement and this Order.
Dissenting Shareholders who validly exercise their right to dissent, as set out in paragraphs 19 and 20 above, and who:
(a) are determined to be entitled to be paid the fair value of their AOC Shares, shall be deemed to have transferred such AOC Shares as of the effective time of the Arrangement (the “ Effective Time ”), without any further act or formality and free and clear of all liens, claims and encumbrances to Surge; or
(b) are, for any reason (including, for clarity, any withdrawal by any Dissenting Shareholder of their dissent) determined not to be entitled to be paid the fair value for their AOC Shares shall be deemed to have participated in the Arrangement on the same basis as a non-dissenting AOC Shareholder and Surge shall transfer the common shares in the capital of Surge to which such Person is entitled to receive under the Arrangement,

but in no event shall the Applicant, Surge or any other person be required to recognize such AOC Shareholders as holders of AOC Shares after the Effective Time, and the names of such AOC Shareholders shall be removed from the register of AOC Shares.

Subject to further order of this Honourable Court, the rights available to AOC Shareholders under the ABCA and the Arrangement to dissent from the Arrangement Resolution shall constitute full and sufficient dissent rights for the AOC Shareholders with respect to the Arrangement Resolution.
Notice to the AOC Shareholders of their right to dissent with respect to the Arrangement Resolution and to receive, subject to the provisions of the ABCA and the Arrangement, the fair value of the consideration to which a Dissenting Shareholder is entitled pursuant to the Arrangement shall be sufficiently given by including information with respect to this right as set forth in the Information Circular which is to be sent to AOC Shareholders in accordance with paragraph 25 of this Order.

Notice

The Information Circular, substantially in the form attached as Exhibit A to the Affidavit, with such amendments thereto as counsel to the Applicant may determine necessary or desirable (provided such amendments are not inconsistent with the terms of this Order), and including the Notice of the Meeting, the Proxy, the Notice of Application and this Order, together with any other communications or documents determined by the Applicant to be necessary or advisable including the Letter of Transmittal (collectively, the “ Meeting Materials ”), shall be sent to those AOC Shareholders who hold AOC Shares, as of the Record Date, the directors of the Applicant, and the auditors of the Applicant, by one or more of the following methods:
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(a) in the case of registered AOC Shareholders, by pre-paid first class or ordinary mail, by courier or by delivery in person, addressed to each such holder at his, her or its address, as shown on the books and records of the Applicant as of the Record Date not later than 21 days prior to the AOC Meeting; and
(b) in the case of the directors and auditors of the Applicant, by email, pre-paid first class or ordinary mail, by courier, email or by delivery in person, addressed to the individual directors or firm of auditors, as applicable, not later than 21 days prior to the date of the AOC Meeting.
Delivery of the Meeting Materials in the manner directed by this Order shall be deemed to be good and sufficient service upon the AOC Shareholders, the directors and auditors of the Applicant of:
(a) the Originating Application;
(b) this Order;
(c) the Notice of the Meeting; and
(d) the Notice of Application.

Final Application

Subject to further order of this Court, and provided that the AOC Shareholders have approved the Arrangement in the manner directed by this Court and the directors of the Applicant have not revoked their approval, the Applicant may proceed with an application for a final Order of the Court approving the Arrangement (the “ Final Order ”) on August 17, 2021 at 2:00 p.m. (Calgary time) or so soon thereafter as counsel may be heard. Subject to the Final Order and to the issuance of the proof of filing of the articles of arrangement, the Applicant, all AOC Shareholders and all other persons affected will be bound by the Arrangement in accordance with its terms.
Any AOC Shareholders or other interested party (each an “ Interested Party ”) desiring to appear and make submissions at the application for the Final Order is required to file with this Court and serve upon the Applicant, on or before 4:00 p.m. (Calgary time) on August 13, 2021, a notice of intention to appear (“ Notice of Intention to Appear ”) including the Interested Party’s address for service, indicating whether such Interested Party intends to support or oppose the application or make submissions at the application, together with a summary of the position such Interested Party intends to advocate before the Court, and any evidence or materials which are to be presented to the Court. Service of this notice on the Applicant shall be effected by service upon the solicitors for the Applicant, Burnet, Duckworth & Palmer LLP.
In the event that the application for the Final Order is adjourned, only those parties appearing before this Court for the Final Order, and those Interested Parties serving a Notice of Intention to Appear in accordance with paragraph 28 of this Order, shall have notice of the adjourned date.

Exemption under Section 151 of the ABCA

AOC is exempt, under Section 151 of the ABCA, from the application of Section 150(1) of the ABCA requiring the inclusion of management’s discussion and analysis for AOC in accordance with the requirements set forth in Form 41-101F1 – Information Required in a Prospectus (“ NI 41-101F1 ”) and National Instrument 51-102 – Continuous Disclosure Obligations (“ NI 52-102 ”).
AOC is exempt, under Section 151 of the ABCA, from the application of Section 150(1) of the ABCA, which requires AOC to have the Interim Financial Statements reviewed by their auditor in accordance with the requirements set forth in NI 41-101F1 and NI 51-102.

Leave to Vary Interim Order

The Applicant is entitled at any time to seek leave to vary this Order upon such terms and the giving of such notice as this Court may direct.

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Justice of the Court of Queen’s Bench of Alberta

APPENDIX F

AOC FAIRNESS OPINION

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June 22, 2021

The Board of Directors of Astra Oil Corp. Astra Oil Corp. Suite 1410, 205 5[th] Avenue SW Calgary, AB T2P 2V7

To the Board of Directors:

National Bank Financial Inc. (“ NBF ”) understands that pursuant to an arrangement agreement dated June 22, 2020 (the “ Arrangement Agreement ”), between Astra Oil Corp. (“ Astra ”) and Surge Energy Inc. (“ Surge ”, and together with Surge, the “ Companies” ), the Companies have agreed, among other things and upon the terms and conditions set out in the Arrangement Agreement, that Surge will acquire, directly or indirectly, all of the issued and outstanding common shares of Astra (the “ Astra Shares ”), including Astra Shares issuable on the exercise of AOC Options or AOC Warrants (as such terms are defined in the Arrangement Agreement), by way of statutory plan of arrangement pursuant to the provisions of section 193 of the Business Corporations Act , R.S.A. 2000, C. B-9 (Alberta) (the “ Arrangement ”).

Pursuant to the Arrangement, holders of Astra Shares (“ Astra Shareholders ”), other than dissenting Astra Shareholders, will be entitled to receive for each Astra Share held, a number of common shares of Surge (each whole common share, a “ Surge Share ”) equal to the Consideration (as defined in the Plan of Arrangement appended to the Arrangement Agreement); the acquired Surge shares will be referred to as the “ Consideration ”.

NBF understands that Surge has entered into lock-up agreements with certain Astra Shareholders, including certain directors and executive officers of Astra (the “ Astra Supporting Shareholders ”), with respect to the Astra Shares beneficially owned, controlled or directed by the Astra Supporting Shareholders (the “ Lock-up Agreements ”), who collectively represent in aggregate not less than 66.67% of the outstanding Astra Shares, whereby the Astra Supporting Shareholders will commit to vote such securities in favour of the Arrangement, subject to the terms and conditions of the Lock-up Agreements.

The terms and conditions of the Arrangement are more fully set forth in the Arrangement Agreement. NBF further understands that the terms and conditions of the Arrangement will be more fully described in a joint management information circular (the “ Circular ”) to be prepared by the Companies and mailed to the Astra Shareholders and to the holders of Surge Shares (“ Surge Shareholders ”), in connection with a special meeting of Astra Shareholders to be called by Astra to seek shareholder approval of the Arrangement and a meeting of Surge Shareholders to be called by Surge to seek shareholders approval of the issuance of Surge Shares pursuant to the Arrangement.

To assist the board of directors of Astra (the “ Board ”) in considering the terms of the Arrangement and the making of its recommendation in respect thereof, Astra engaged NBF to provide financial advice in respect of the Arrangement. As part of its engagement, NBF has been requested to provide its fairness opinion (the “ Fairness Opinion ”) as to whether the Consideration to be received by Astra Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the Astra Shareholders, and deliver this written Fairness Opinion to the Board.

ENGAGEMENT OF NATIONAL BANK FINANCIAL INC.

NBF was formally engaged by Astra pursuant to an engagement agreement (the “ Engagement Agreement ”) dated effective April 30, 2021 whereby Astra retained NBF as its financial advisor with respect to a corporate sale and/or merger transaction which results in a change of control of Astra. Pursuant to the Engagement Agreement, NBF agreed to provide services in connection with the Arrangement, including delivery of the Fairness Opinion at the request of the Board. NBF has not been asked to prepare, and has not prepared, a formal valuation of Astra or Surge, or any of their respective securities or assets, and this Fairness Opinion should not be construed as such.

The terms of the Engagement Agreement provide that NBF is to be paid a success fee for its services as exclusive financial advisor to Astra. In addition, Astra has agreed to reimburse NBF for reasonable expenses incurred on behalf of Astra and for NBF’s legal expenses relating to the Fairness Opinion, and indemnify, among others, NBF in respect of certain liabilities that might arise out of our engagement under the Engagement Agreement.

NBF understands that the Fairness Opinion (or a summary thereof) may, at the discretion of the Board and as required by the Arrangement Agreement, be included in materials distributed to Astra Shareholders with respect to the Arrangement (including the Circular), and, subject to the terms of the Engagement Agreement, NBF consents to the inclusion thereof (in a form acceptable to NBF).

RELATIONSHIP WITH INTERESTED PARTIES

None of NBF, its affiliates or associates is an insider, associate or affiliate of the Companies, or any of their respective associates or affiliates (as such terms are defined in the Securities Act (Alberta)) (collectively, the “ Interested Parties ”) or a related party of the Interested Parties. NBF acts as a trader and dealer, both as principal and agent, in major financial markets and, as such, may have had and may in the future have positions in the securities of any Interested Party and, from time to time, may have executed or may execute transactions on behalf of such companies or clients for which it received or may receive compensation. As an investment dealer, NBF conducts research on securities and has, in the past, in the ordinary course of its business, provided research reports and investment advice to its clients on investment matters, including with respect to the Interested Parties, and may, in the ordinary course of business, provide research reports and investment advice to its clients on the Arrangement.

NBF’s controlling shareholder, National Bank of Canada (the “ Bank ”), a Canadian chartered bank, is a lender to Astra and Surge, and the Bank is expected to continue to be a lender to the resulting entity from the Arrangement (the “ Pro-Forma Entity ”). To the extent that the Bank is required to consent to the Arrangement or approve the credit to the Pro-Forma Entity, NBF has no role in the Bank’s determination.

NBF has provided financial advisory services to Astra in the past two years, in addition to the Engagement Agreement. In addition, NBF has been in the last two years, and continues to be, engaged by Surge on various M&A initiatives; however, NBF was in no part engaged as an advisor to Surge in connection with the Arrangement.

Other than as set forth above, there are no understandings, agreements or commitments between NBF and any Interested Party with respect to any future business dealings. NBF may, in the future, as it has in the past, in the ordinary course of its business, provide financial advisory, credit or investment banking services to any of the Interested Parties.

CREDENTIALS OF NATIONAL BANK FINANCIAL INC.

NBF is a leading Canadian investment banking firm with operations in a broad range of investment banking activities, including corporate finance, mergers and acquisitions, equity and fixed income sales and trading and investment research. NBF has been a financial advisor in a significant number of transactions, and is regularly engaged in providing financial advice to public and private companies across a variety of sectors and has extensive experience preparing fairness opinions.The Fairness Opinion expressed herein is the opinion of NBF and the form and content hereof have been reviewed and approved for release by a group of managing directors of NBF, each of whom is experienced in merger, acquisition, divestiture and fairness opinion matters.

SCOPE OF REVIEW

In connection with rendering the Fairness Opinion, NBF has received and/or relied upon or carried out, among other things, the following (without attempting to verify the accuracy or completeness thereof):

Transaction documents:

the Arrangement Agreement, including the plan of arrangement contained therein;
a draft of the Circular; and
the form of Lock-up Agreement;

Financial disclosure relating to the Companies where applicable:

audited annual financial statements of each of the Companies as at and for the year ended December 31, 2020;
Management’s Discussion and Analysis prepared by each of the Companies’ management for the year ended December 31, 2020;
interim unaudited financial statements and reports of each of the Companies as at and for the three months ended March 31, 2021;
Management’s Discussion and Analysis prepared by each of the Companies’ management for the three months ended March 31, 2021;

Reserves and other evaluation information relating to the Companies:

the evaluation report, effective December 31, 2020, of Sproule Associates Limited. (“ Sproule ”), independent engineering consultants of Calgary, Alberta, regarding the petroleum and natural gas reserves of Astra;
the evaluation report, effective December 31, 2019, of Sproule, regarding the petroleum and natural gas reserves of Surge;

Other information, interviews and discussions relating to the Companies:

financial and operating information, including internal management forecasts, well results, production data, land summaries and other such information, prepared by the Companies;

discussions with senior officers of the Companies, regarding financial results, budgets and business plans, key assets and obligations, development projects and abandonment and site reclamation obligations;
due diligence meetings with the management of the Companies;
public information relating to the business and conditions of Surge;
a letter of representation from senior officers of Astra, addressed to us and dated June 22, 2021, as to matters of fact relevant to Astra and the Arrangement and as to the completeness and accuracy of the information upon which the Fairness Opinion is based (the “ Astra Representation Letter ”);
a letter of representation from senior officers of Surge, addressed to us and dated July 15, 2021, as to matters of fact relevant to Surge and the Arrangement and as to the completeness and accuracy of the information upon which the Fairness Opinion is based (together with the Astra Representation Letter, the “ Representation Letters ”); and
such other financial, market, corporate and industry information, research reports, investigations, discussions and analysis, research and testing of assumptions as we considered necessary or appropriate in the circumstances.

In addition to the information described above, NBF also participated in certain meetings and discussions with senior officers of the Companies and Astra’s external legal counsel regarding the Arrangement.

NBF did not meet with the auditors of either of the Companies and has assumed the accuracy and fair presentation of all financial information provided to NBF, including, without limitation, the audited and unaudited financial statements of the Companies, and, as applicable, the reports of the auditors thereon. NBF did not meet with Sproule and has assumed the accuracy and fair presentation of the evaluation reports of the Companies.

NBF has not, to its knowledge, been denied access to any information.

ASSUMPTIONS AND LIMITATIONS

The Fairness Opinion is subject to the assumptions, explanations and limitations herein before described and as set forth below.

NBF has relied, without independent verification (except for the Representation Letters), upon, and has assumed the completeness, accuracy and fair presentation of, all of the financial and other information, data, advice, opinions, representations and other information (collectively, the “ Information ”) obtained by it from public sources or provided to NBF by or on behalf of the Companies and their respective advisors or otherwise in connection with its engagement, including, without limitation, in meetings and discussions referred to above under “Scope of Review”. The Fairness Opinion is conditional upon the completeness, accuracy and fair presentation of such Information. In accordance with the Engagement Agreement, but subject to the exercise of its professional judgment, NBF has not (other than through the Representation Letters) attempted to verify independently the completeness, accuracy or fair presentation of the Information. With respect to any operating and financial models, forecasts, projections and estimates provided to NBF and used in the analysis supporting the opinion, NBF has assumed that such financial models, forecasts, projections and estimates have been reasonably prepared on bases reflecting the best currently available assumptions, estimates and judgments of management of the Companies as to the matters covered thereby having regard to the plans, financial conditions and prospects of the Companies, and in rendering the Fairness Opinion, we express no view as to the reasonableness of such forecasts, projections or estimates or the assumptions on which they are based.

Senior officers of the Companies have represented to NBF in the Representation Letters dated the date hereof, among other things, that: (i) the Information provided orally by, or in the presence of, an officer, employee or representative of Astra or Surge (respectively) or in writing by Astra or Surge (respectively) or, in the case of Surge, its subsidiaries (as such term is defined in the Business Corporations Act (Alberta)) or their respective agents to NBF relating to Astra or Surge (respectively) and, in the case of Surge, its subsidiaries or the Arrangement for the purpose of preparing the Fairness Opinion was, at the date the Information was provided to NBF, and is as of the date hereof, complete, true and correct and did not and does not contain any untrue statement of a material fact in respect of Astra or Surge (respectively), in the case of Surge, its subsidiaries or the Arrangement and did not and does not omit to state a material fact in respect of Astra or Surge (respectively), in the case of Surge, its subsidiaries, or the Arrangement necessary to make the Information not misleading in light of the circumstances under which the Information was made or provided; (ii) since the dates on which the Information was provided to NBF and as of the date hereof, except as disclosed in writing to NBF, there has been no material change, financial or otherwise, in the financial condition, assets, liabilities (contingent or otherwise), business, operations or prospects of Astra or Surge (respectively) or, in the case of Surge, its subsidiaries, and there has been no material change or change in any material fact or new material fact which is of a nature so as to render the Information untrue or misleading in any material respect, or which would reasonably be expected to have a material effect on the Fairness Opinion; (iii) any portions of the Information provided to NBF which constitute forecasts, projections or estimates or other forward-looking information (A) were reasonable, (B) were prepared using the assumptions identified therein, which, in the reasonable opinion of Astra and Surge (respectively), are (or were at the time of preparation and continue to be) reasonable in the circumstances, and (C) are not, in the reasonable belief of such senior officers, misleading in any material respect in light of the assumptions used therefor; (iv) other than as disclosed in the Information, Astra and Surge (respectively) do not have any material contingent liabilities and there are no actions, suits, proceedings or inquiries pending or, to the knowledge of the Astra and Surge (respectively), threatened in writing against or affecting Astra or Surge (respectively) or their assets or, in the

case of Surge, its subsidiaries at law or in equity or before or by any federal, provincial, municipal or other governmental department, commission, bureau, board agency or instrumentality which may in any way materially adversely affect Astra or Surge (respectively) and, in the case of Surge, its subsidiaries taken as a whole; (v) since the dates on which the Information was provided to NBF, no material transaction has been entered into by Astra or Surge (respectively); and (vi) all financial material, documentation and other data concerning the Arrangement, Astra and Surge (respectively), and, in the case of Surge, its subsidiaries, including any projections or forecasts, provided to NBF were prepared on a basis consistent in all material respects with the accounting policies applied in the audited financial statements of the Companies dated as at December 31, 2020, reflect the assumptions disclosed therein (which assumptions management of Astra and Surge, respectively, believe to be reasonable) and do not contain any untrue statement of a material fact or omit to state any material fact necessary to make such financial material, documentation or data not misleading in light of the circumstances in which such financial material, documentation and data was provided to NBF.

With respect to all legal and tax matters relating to the Arrangement and the implementation thereof, we have relied upon, without independent verification, the assessment of Astra’s legal and tax counsel with respect to such matters. We do not express any opinion with respect to the tax consequences to Astra or any Astra Shareholder that may arise as a result of the Arrangement and have assumed that no material negative tax consequences arise for Astra as a result of the Arrangement. The Arrangement is subject to a number of conditions outside of the control of the Companies and we have assumed all conditions precedent to the completion of the Arrangement can be satisfied in due course and all consents, permissions, exemptions or orders of relevant regularity authorities will be obtained, without adverse conditions or qualifications. In rendering this Fairness Opinion, we express no view as to the likelihood that the conditions to the Arrangement will be satisfied or waived or that the Arrangement will be implemented within an appropriate time frame.

NBF has also assumed that all of the representations and warranties contained in the Arrangement Agreement are true and correct in all material respects (other than those which contain a materiality qualifier, in which case we have assumed those to be true and correct) as of the date hereof and that the Arrangement will be completed substantially in accordance with its terms and all applicable laws.

In addition, NBF has assumed that neither Astra nor Surge will incur any material liability or obligation, or lose any material rights, as a result of completion of the Arrangement and that the procedures being followed to implement the Arrangement are valid and effective, in accordance with applicable laws, and that the disclosure of Astra, Surge and the Arrangement in any disclosure documents will be accurate and will comply with the requirements of applicable laws.

The Fairness Opinion is rendered on the basis of securities markets, economic, financial and general business conditions prevailing as at the date hereof and the condition and prospects, financial and otherwise, of the Companies and their affiliates, as they were reflected in the Information. Any changes therein my affect the Fairness Opinion and, although NBF reserves the right to change, withdraw or supplement the Fairness Opinion in such event or in the event that subsequent developments affect the Fairness Opinion, NBF disclaims any obligation to advise any person of any change that may come to its attention or to update, revise or reaffirm the Fairness Opinion after the date hereof. In our analyses and in preparing the Fairness Opinion, we made numerous assumptions with respect to industry performance, general business, market and economic conditions and other matters, many of which are beyond the control of any party involved in the Arrangement. While NBF believes these assumptions to be reasonable with respect to the Companies in the industry in which they operate, some or all of these assumptions may prove to be incorrect.

The Fairness Opinion has been prepared and provided for the sole and exclusive use of the Board and may not be relied upon by any other person without the prior written consent of NBF for the purposes of including the Fairness Opinion (or a summary thereof) in the Circular. The Fairness Opinion is provided as of the date hereof and NBF disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting the Fairness Opinion that may come or be brought to the attention of NBF after the date hereof. Without limiting the foregoing, in the event that any of the Information relied upon by NBF in preparing the Fairness Opinion was inaccurate, incomplete or misleading in any material respect or if there is any material change in any fact or matter affecting the Fairness Opinion after the date hereof, NBF reserves the right to change, modify or withdraw the Fairness Opinion.

NBF has not been asked to prepare and has not prepared a formal valuation or appraisal of the securities or assets of Astra, Surge or of any of their respective affiliates, and the Fairness Opinion should not be construed as such. The Fairness Opinion does not address the relative merits of the Arrangement as compared to other arrangements or business strategies that might be available to Astra, nor does it address the underlying business decision to enter into the Arrangement Agreement. In considering the fairness of the consideration offered to the Astra Shareholders pursuant to the Arrangement from a financial point of view, NBF considered the Arrangement from the perspective of Astra Shareholders generally and did not consider the specific circumstances of any particular Astra Shareholder.

NBF expresses no opinion with respect to future trading prices of the securities of the Companies and the Fairness Opinion does not constitute a recommendation as to whether any Astra Shareholder should vote in favour of the Arrangement.

The Fairness Opinion is based upon a variety of factors. Accordingly, NBF believes that its analyses must be considered as a whole. Selecting portions of its analyses or the factors considered by NBF, without considering all factors and analyses together, could create a misleading view of the process underlying the Fairness Opinion. The preparation of the Fairness Opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Any attempt to do so could lead to undue emphasis on any particular factor or analysis.

CONCLUSION

Based upon, and subject to the foregoing and such other matters as we consider relevant, NBF is of the opinion that, as of the date hereof, the Consideration to be received by Astra Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the Astra Shareholders.

Yours very truly,

==> picture [229 x 28] intentionally omitted <==

NATIONAL BANK FINANCIAL INC.

APPENDIX G INFORMATION CONCERNING ASTRA OIL CORP.

	Page
NOTE REGARDING FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-2
CORPORATE STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-2
GENERAL DEVELOPMENT OF THE BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-3
DESCRIPTION OF AOC’S BUSINESS AND OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-3
STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-5
ADDITIONAL INFORMATION RELATING TO RESERVES DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-9
OTHER OIL AND NATURAL GAS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-11
SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-13
DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-14
DISCLOSURE OF OUTSTANDING SECURITY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-14
CONSOLIDATED CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-14
OPTIONS TO PURCHASE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-14
DESCRIPTION OF AOC SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-16
PRIOR SALES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-16
PRINCIPAL SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-17
DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-17
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-19
ESCROWED SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-22
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-22
LEGAL PROCEEDINGS AND REGULATORY ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-22
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-23
AUDITORS, TRANSFER AGENT AND REGISTRAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-23
MATERIAL CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-23
INTERESTS OF EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-24
SIGNIFICANT ACQUISITIONS AND SIGNIFICANT DISPOSITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-24
REPORTING REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	G-24
SCHEDULE A - Audited Annual Financial Statements of AOC for the Years Ended December 31, 2020, 2019 and 2018
SCHEDULE B - Comparative Interim Unaudited Financial Statements of AOC for the Three-Month Period Ended March 31, 2021
SCHEDULE C - Report on Reserves Data by Independent Qualified Reserves Evaluator and Report of Management and Directors on	Oil and
Gas Disclosure
SCHEDULE D - Charter of Audit Committee of AOC

Capitalized words, phrases and abbreviations used but not otherwise defined in this Appendix G shall have the meanings ascribed to such words, phrases and abbreviations in the “ Glossary of Terms ” in the body of this Information Circular to which this Appendix G is attached. Certain other terms used herein are defined in NI 51-101 and unless the context otherwise requires, shall have the same meaning herein as ascribed to such terms in NI 51-101.

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Appendix G contains certain forward-looking statements and forward looking information which are based upon AOC’s current internal expectations, estimates, projections, assumptions and beliefs. In some cases, words such as “plan”, “expect”, “intend”, “believe”, “estimate”, “may”, “will”, “potential” and other similar words, or statements that certain events or conditions “may” or “will” occur are intended to identify forward-looking statements and forward-looking information. These statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in the forward-looking statements or information. In addition, this Appendix G may contain forward-looking statements and information attributed to third-party industry sources. Undue reliance should not be placed on these forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur. Such forward-looking statements and information in this Appendix G speak only as of the date of this Appendix G.

Forward-looking statements and information in this Appendix G include, but are not limited to, statements with respect to:

plans to complete the Arrangement;
the consideration to be received by AOC Shareholders pursuant to the Arrangement;
drilling, completion and facilities costs;
timing of development of undeveloped reserves;
the tax position of AOC;
oil, natural gas and NGLs production levels;
abandonment and reclamation costs and timelines;
allocation of funding for the development of reserves; and
sources of funding for development and costs related thereto.

Although AOC believes that the expectations reflected in the forward-looking statements contained in this Appendix G are reasonable, there can be no assurance that such expectations will prove to be correct. AOC cannot guarantee future results, levels of activity, performance or achievements. Some of the risks and other factors, some of which are beyond AOC’s control, which could cause results to differ materially from those expressed in the forward-looking statements and information contained in this Appendix G include, but are not limited to:

general economic conditions in Canada and globally;
industry conditions, including fluctuations in the price of oil and natural gas;
governmental regulation of the oil and gas industry, including environmental regulation;
fluctuation in foreign exchange or interest rates;
liabilities inherent in oil and natural gas operations;
geological, technical, drilling and processing problems and other difficulties in producing reserves;
failure to realize anticipated benefits of acquisitions;
failure to obtain industry partner and other third-party consents and approvals, when required;
competition for, among other things, capital, acquisitions of reserves, undeveloped land and skilled personnel;
competition for and inability to retain drilling rigs and other services; and
the need to obtain required approvals from regulatory authorities.

Statements relating to “reserves” are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future. Readers are cautioned that the foregoing list of factors is not exhaustive. The forward-looking statements contained in this Appendix G are expressly qualified by this cautionary statement. AOC assumes no duty to update any of the forward-looking statements contained herein after the date hereof to conform such statements to actual results or to changes in AOC’s expectations except as otherwise required by applicable legislation.

All dollar amounts in this Appendix G are in Canadian dollars unless otherwise stated.

CORPORATE STRUCTURE

Name, Address and Incorporation

AOC was incorporated under the ABCA on April 1, 2014 as “1812581 Alberta Ltd.” On June 4, 2014, AOC amended its articles to change its name to “Astra Oil Corp.” On October 1, 2014, AOC further amended its articles to create a new class of shares designated as series 1 special

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voting shares. On November 10, 2020, AOC filed Articles of Amendment removing its private company restrictions. On December 8, 2020, AOC amalgamated with Corval Energy Ltd. (“ Corval ”) to form “Astra Oil Corp.”.

AOC’s head office is located at Suite 1410, 205 – 5th Avenue SW, Calgary, Alberta T2P 2V7 and its registered office is located at 2400, 525 – 8th Avenue SW, Calgary, Alberta T2P 1G1.

AOC does not have any subsidiaries as of the date of this Information Circular.

GENERAL DEVELOPMENT OF THE BUSINESS

Recent Developments

On June 22, 2021, AOC entered into the Arrangement Agreement with Surge, pursuant to which AOC Shareholders will receive 3.1746 Surge Shares for every 1.0 AOC Share held, in accordance with the Plan of Arrangement. For a full description of the Arrangement and the Arrangement Agreement see “ The Arrangement – The Arrangement Agreement ” in the body of this Information Circular.

Developments in 2020

On September 15, 2020, AOC entered into an arrangement agreement with Corval, as amended on October 15, 2020, pursuant to which AOC acquired all of the issued and outstanding shares of Corval by way of a plan of arrangement under section 193 of the ABCA (the “ Corval Arrangement ”). In connection with the Corval Arrangement, AOC amended its articles to remove its private company restrictions and upon closing of the transaction on December 8, 2020, amalgamated with Corval.

Developments in 2019

On October 22, 2019, AOC closed an asset purchase agreement to acquire land in southeast Saskatchewan for total cash consideration of $0.5 million.

Developments in 2018

On February 26, 2018, AOC acquired certain interests in petroleum and natural gas properties and undeveloped land located in southeast Saskatchewan for total consideration of approximately $4.5 million, consisting of $2.7 million of cash consideration and the issuance of 600,000 AOC Shares.

On January 31, 2018, AOC acquired certain interests in petroleum and natural gas properties and undeveloped land located in southeast Saskatchewan for cash consideration of approximately $1.4 million.

DESCRIPTION OF AOC’S BUSINESS AND OPERATIONS

AOC is a junior oil and natural gas producer headquartered in Calgary, Alberta with operations focused in the Western Canadian Sedimentary Basin in Alberta, Southeast Saskatchewan and the Williston Basin in Manitoba. AOC has grown significantly and, with the exception of the Corval Arrangement, primarily organically, over the last 3 years with strong drilling results while maintaining conservatively low net debt levels. In 2018, AOC exhibited capital drilling success with 28 gross (24.7 net) wells during the year while executing AOC’s organic delineation program. The 2019 year strongly demonstrated the deliverability and consistency of AOC’s asset base through material debt reductions and production stabilization with the drilling of 26 gross (18.4 net) wells and a focus on strategic drilling to maintain flexibility and corporate cash flows amidst global commodity volatility. Throughout 2020, AOC battled the changing economic landscape resulting from COVID-19 and its effects on the oil and gas market but successfully drilled 9 gross (6.25 net) wells.

Principal Properties

AOC’s principal oil and natural gas properties are located in the Western Sedimentary Basin in Alberta, and the Williston Basin in Saskatchewan and Manitoba. The following is a description of AOC’s principal oil and natural gas properties as at December 31, 2020. AOC’s properties in Alberta and Manitoba, as well as other smaller properties located in Saskatchewan, were acquired in connection with the Corval Arrangement, which was completed on December 8, 2020. Accordingly, the production information provided below for such properties corresponds to the time period from December 8, 2020, to December 31, 2020 averaged over the full 2020 year.

Estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

Crossfield, Alberta

The Crossfield property located in Alberta consists of an average mineral working interest of approximately 100% and 320 gross (320 net) acres of undeveloped land with average net production for the year-ended December 31, 2020 of 3 Boe/d, 92% of which was from oil and NGLs. No

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wells were drilled in the area in 2020. As at December 31, 2020, the AOC Reserves Report attributed proved plus probable reserves of 186 MBoe to this area, 166 MBbls of which was made up of oil and NGLs.

Stanmore, Alberta

The Stanmore property located in Alberta consists of an average mineral working interest of approximately 95% and 13,200 gross (13,164 net) acres of undeveloped land with average net production for the year-ended December 31, 2020 of 5 Boe/d, 61% of which was from oil and NGLs. No wells were drilled in the area in 2020. As at December 31, 2020, the AOC Reserves Report attributed proved plus probable reserves of 559 MBoe to this area, 274 MBbls of which was made up of oil and NGLs.

Minard, Saskatchewan

The Minard property located in southeast Saskatchewan consists of an average mineral working interest of approximately 100% and 1,993 gross (1,993 net) acres of undeveloped land with average net production for the year ended December 31, 2020 of 223 Boe/d, which was entirely from oil and NGLs. AOC drilled 1 (1.0 net) wells in the area in 2020. As at December 31, 2020, the AOC Reserves Report attributed proved plus probable reserves of 2,823 MBoe to this area, 2,406 MBbls of which was made up of oil and NGLs.

Pinto, Saskatchewan

The Pinto property located in southeast Saskatchewan consists of an average mineral working interest of approximately 87% and 7,902 gross (7,115 net) acres of undeveloped land with average net production for the year ended December 31, 2020 of 864 Boe/d, 70% of which was from oil and NGLs. No wells were drilled in the area in 2020. As at December 31, 2020, the AOC Reserves Report attributed proved plus probable reserves of 5,381 MBoe to this area, 4,122 MBbls of which was made up of oil and NGLs.

Steelman, Saskatchewan

The Steelman property located in southeast Saskatchewan consists of an average mineral working interest of approximately 42% and 9,675 gross (5,061 net) acres of undeveloped land with average net production for the year ended December 31, 2020 of 758 Boe/d, 97% of which was from oil and NGLs. AOC drilled 6 (3.75 net) wells in the area in 2020. As at December 31, 2020, the AOC Reserves Report attributed proved plus probable reserves of 3,176 MBoe to this area, 2,785 MBbls of which was made up of oil and NGLs.

Viewfield, Saskatchewan

The Viewfield property located in southeast Saskatchewan consists of an average mineral working interest of approximately 96% and 1,916 gross (1,885 net) acres of undeveloped land with average net production for the year ended December 31, 2020 of 167 Boe/d, which was entirely from oil and NGLs. AOC drilled 2 (1.5 net) wells in the area in 2020. As at December 31, 2020, the AOC Reserves Report attributed proved plus probable reserves of 1,539 MBoe to this area, 1,357 MBbls of which was made up of oil and NGLs.

Sinclair/Daly, Manitoba

The Sinclair and Daly properties located in Maintoba consists of an average mineral working interest of approximately 76% and 1,660 gross (1,636 net) acres of undeveloped land with average net production for the year-ended December 31, 2020 of 52 Boe/d, which was entirely from oil and NGLs. No wells were drilled in the area in 2020. As at December 31, 2020, the AOC Reserves Report attributed proved plus probable reserves of 2,375 MBoe to this area, which was made up of oil, gas and NGLs.

Other

AOC’s other remaining properties located in southeast Saskatchewan consist of average working interests of approximately 91% and 27,286 gross (25,316 net) acres of undeveloped land. There was no production or drilling activity for the year ended December 31, 2020 within these non-core areas. As at December 31, 2020, the AOC Reserves Report attributed proved plus probable reserves of 578 MBoe to this area, made up of oil and NGLs.

AOC’s other remaining properties located in Manitoba consist of average working interests of approximately 56% and 313 gross (313 net) acres of undeveloped land. There was no production or drilling activity for the year ended December 31, 2020 within these non-core areas. As at December 31, 2020, the AOC Reserves Report attributed proved plus probable reserves of 39 MBoe to this area, made up of oil and NGLs.

Reorganizations

Except for in connection with the Corval Arrangement, AOC has not completed any material reorganizations within its two most recently completed financial years.

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No material reorganizations have been either completed or proposed during the current financial year other than in respect of the Arrangement.

Environmental, Health and Safety Policies

AOC supports environmental awareness and protection and employee health and safety by integrating, implementing and communicating the essential principles, policies, procedures and practices through its environmental management systems and employee occupational health and safety programs.

AOC develops emergency response teams and preparedness plans in conjunction with local authorities, emergency services and the communities in which it operates in order to effectively respond to an environmental incident should it arise. Environmental assessments are undertaken for new projects or when acquiring new properties or facilities in order to identify, assess and minimize environmental risks and operational exposures. Documentation is maintained to support internal accountability and measure operation performance against recognized industry indicators to assist in achieving the objectives of the described policies and programs.

AOC also faces environmental, health and safety risks in the normal course of its operations due to the handling and storage of hazardous substances. AOC’s environmental and occupational health and safety management systems are designed to manage such risks in AOC’s business and allow action to be taken to mitigate the extent of any environmental, health or safety impacts from such operations.

Personnel

As at the date hereof AOC employed fifteen individuals at its head office in Calgary, Alberta and two employees in the field. All other field operations are conducted by consultants.

Specialized Skill and Knowledge

AOC relies on specialized skills and knowledge to gather, interpret and process geological and geophysical data; drill and complete wells; design and operate production facilities; and numerous additional activities required to explore for, acquire and produce oil and natural gas. AOC’s permanent staff have training and experience in the disciplines of engineering, finance, geology and land.

STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION

Oil and Gas Reserves

In accordance with NI 51-101, pursuant to the AOC Reserves Report, Sproule evaluated the crude oil, NGLs and natural gas reserves of AOC as at December 31, 2020. The date of preparation of the AOC Reserves Report is March 10, 2021. The Report on Reserves Data By Independent Qualified Reserves Evaluator or Auditor in Form 51-101F2 and the Report of Management and Directors on Oil and Gas Disclosure in Form 51-101F3 are attached as Schedule C to this Appendix G.

The tables below are a summary of the crude oil, NGLs and natural gas reserves and the net present value of future net revenue attributable to the reserves of AOC prior to the completion of the Arrangement, as evaluated in the AOC Reserves Report, based on forecast price and cost assumptions. The tables summarize the data contained in the AOC Reserves Report and, as a result, may contain slightly different numbers than such report due to rounding. Also, due to rounding, certain columns may not sum exactly.

All of AOC’s reserves are located in Canada and specifically, in the provinces of Alberta, Saskatchewan and Manitoba. AOC does not have any heavy oil reserves.

The net present value of future net revenue attributable to reserves is stated without provision for interest costs and general and administrative costs, but after providing for estimated royalties, production costs, development costs, other income, future capital expenditures and well abandonment and reclamation costs. It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to reserves estimated by Sproule represent the fair market value of those reserves. Other assumptions and qualifications relating to costs, prices for future production and other matters are summarized herein. The recovery and reserve estimates of oil, NGLs and natural gas reserves provided herein are estimates only. Actual reserves may be greater than or less than the estimates provided.

AOC determined the future net revenue and present value of future net revenue after income tax expenses by utilizing Sproule’s before income tax future net revenue and AOC’s estimate of income tax. AOC’s estimates of the after income tax value of future net revenue have been prepared based on before income tax reserves information and include assumptions and estimates of AOC’s tax pools and the sequences of claims and rates of claim thereon. The values shown may not be representative of future income tax obligations, applicable tax horizons or after tax valuations. The after tax net present value of AOC’s oil and gas properties reflects the tax burden of AOC’s properties on a stand-alone basis. It does not provide an estimate of the value of AOC as a business entity, which may be significantly different. The audited annual

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financial statements of AOC for the years ended December 31, 2020, 2019 and 2018 attached at Schedule A hereto should be consulted for additional information regarding AOC’s taxes.

The AOC Reserves Report is based on certain factual data supplied by AOC and Sproule’s opinion of reasonable practice in the industry. The extent and character of ownership and all factual data pertaining to petroleum properties and contracts (except for certain information residing in the public domain) were supplied by AOC to Sproule. Sproule accepted this data as presented and neither title searches nor field inspections were conducted.

Reserves Data (Forecast Prices and Costs)

SUMMARY OF OIL AND NATURAL GAS RESERVES AND NET PRESENT VALUES OF FUTURE NET REVENUE AS OF DECEMBER 31, 2020 FORECAST PRICES AND COSTS

				RESERVES	RESERVES	RESERVES
LIGHT AND MEDIUM CRUDE OIL CONVENTIONAL NATURAL GAS NGLs Gross (MBbls) Net (MBbls) Gross (MMcf) Net (MMcf) Gross (MBbls) Net (MBbls) 5,222 2,936 3,467 2,545 249 176 49 43 257 226 20 18 6,088 4,262 7,502 6,059 1,109 933 11,359 7,241 11,227 8,831 1,378 1,127 6,719 4,978 7,954 6,490 904 757 18,078 12,219 19,181 15,321 2,282 1,884 NET PRESENT VALUES OF FUTURE NET REVENUE BEFORE INCOME TAX EXPENSES DISCOUNTED AT (%/year) 0% ($000s) 5% ($000s) 10% ($000s) 15% ($000s) 20% ($000s) Unit Value Before Income Tax Discounted at 10% per Year ($/Boe) . . . . . 71,739 65,271 59,012 53,730 49,372 16.69 . . . . . 581 530 464 399 342 4.73 . . . . . 82,688 64,762 51,040 40,613 32,605 8.23 . . . . . 155,008 130,562 110,516 94,742 82,319 11.23 . . . . . 146,082 111,757 88,259 71,730 59,678 12.95 . . . . . 301,090 242,319 198,775 166,472 141,996 11.93							NGLs

. . . . . .
	. . . . . . . . . . . . . . . . . . . . . . . .
		0% ($000s) 71,739 581 82,688 155,008 146,082 301,090	5% ($000s) 65,271 530 64,762 130,562 111,757 242,319	10% ($000s) 59,012 464 51,040 110,516 88,259 198,775	15% ($000s) 53,730 399 40,613 94,742 71,730 166,472	20% ($000s) 49,372 342 32,605 82,319 59,678 141,996		Unit Value Before Income Tax Discounted at 10% per Year ($/Boe)
									16.69 4.73 8.23 11.23 12.95 11.93

	NET PRESENT VALUES OF FUTURE NET REVENUE	NET PRESENT VALUES OF FUTURE NET REVENUE	NET PRESENT VALUES OF FUTURE NET REVENUE	NET PRESENT VALUES OF FUTURE NET REVENUE	NET PRESENT VALUES OF FUTURE NET REVENUE
	AFTER INCOME TAX		EXPENSES DISCOUNTED AT (%/year)(1)
	0%	5%	10%	15%	20%
RESERVES CATEGORY	($000s)	($000s)	($000s)	($000s)	($000s)
PROVED:
Developed Producing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	71,739	65,290	59,046	53,773	49,423
Developed Non-Producing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	581	528	461	397	339
Undeveloped . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	75,286	59,076	46,596	37,088	29,773
TOTAL PROVED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	147,606	124,894	106,103	91,258	79,535
PROBABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	107,501	81,643	64,036	51,778	42,927
TOTAL PROVED PLUS PROBABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	255,107	206,537	170,139	143,036	122,462

Note:

(1) The tax effect on the net present values of future revenue were calculated internally by AOC management.

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TOTAL FUTURE NET REVENUE (UNDISCOUNTED) AS OF DECEMBER 31, 2020 FORECAST PRICES AND COSTS

RESERVES CATEGORY Total Proved . . . . Total Proved plus Probable . . .	REVENUE ($000s) 499,163 861,093	ROYALTIES ($000s) (57,220) (105,296)	OPERATING COSTS ($000s) (169,339) (280,862)	DEVELOPMENT COSTS ($000s) (94,442) (145,405)	ABANDONMENT AND RECLAMATION COSTS ($000s) (23,154) (28,440)	FUTURE NET REVENUE BEFORE INCOME TAX EXPENSES ($000s) 155,008 301,090	FUTURE INCOME TAX EXPENSES ($000s) 7,402 45,983	FUTURE NET REVENUE AFTER INCOME TAX EXPENSES ($000s)
								147,606 255,107

FUTURE NET REVENUE BY PRODUCTION GROUP AS OF DECEMBER 31, 2020 FORECAST PRICES AND COSTS

RESERVES CATEGORY Proved . . . . . . . . . . . . . . . . Proved plus Probable . . . . .	PRODUCTION GROUP Light and Medium Crude Oil . . . . . . . . . Conventional Natural Gas . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . Light and Medium Crude Oil . . . . . . . . . Conventional Natural Gas . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .	FUTURE NET REVENUE BEFORE INCOME TAX EXPENSES (discounted at 10%/year) ($000s) 110,516 — 110,516 198,775 — 198,775	UNIT VALUE
			($/Bbl or $/Mcf) 15.26 — 11.23 16.27 — 11.93

Pricing Assumptions – Forecast Prices and Costs

Sproule employed the following pricing, exchange rate and inflation rate assumptions as of December 31, 2020 in the AOC Reserves Report in estimating reserves data using forecast prices and costs.

PRICING AND INFLATION RATE ASSUMPTIONS FORECAST PRICES AND COSTS	PRICING AND INFLATION RATE ASSUMPTIONS FORECAST PRICES AND COSTS	PRICING AND INFLATION RATE ASSUMPTIONS FORECAST PRICES AND COSTS	PRICING AND INFLATION RATE ASSUMPTIONS FORECAST PRICES AND COSTS	PRICING AND INFLATION RATE ASSUMPTIONS FORECAST PRICES AND COSTS	PRICING AND INFLATION RATE ASSUMPTIONS FORECAST PRICES AND COSTS
LIGHT AND MEDIUM CRUDE OIL WTI Cushing Oklahoma 40° API ($US/Bbl) Canadian Light Sweet Crude 40° API ($/Bbl) Hardisty Heavy 12° API ($Cdn/Bbl) 47.17 55.76 39.87 50.17 59.89 43.20 53.17 63.48 46.86 54.97 65.76 48.67 56.07 67.13 49.65 57.19 68.53 50.65 58.34 69.95 51.67 59.50 71.40 52.71 60.69 72.88 53.76 61.91 74.34 54.84 63.15 75.83 55.94		NATURAL GAS AECO Gas Price ($/MMBtu) 2.78 2.70 2.61 2.65 2.70 2.76 2.81 2.87 2.92 2.98 3.04		NGLs
WTI Cushing Oklahoma 40° API ($US/Bbl) 47.17 50.17 53.17 54.97 56.07 57.19 58.34 59.50 60.69 61.91 63.15	Canadian Light Sweet Crude 40° API ($/Bbl) 55.76 59.89 63.48 65.76 67.13 68.53 69.95 71.40 72.88 74.34 75.83		Edmonton Propane ($Cdn/Bbl) 18.18 21.91 24.57 25.47 26.00 26.54 27.09 27.65 28.23 28.79 29.37	Edmonton Butane ($Cdn/Bbl) 26.36 32.85 39.20 40.65 41.50 42.36 43.24 44.14 45.06 45.96 46.88	Inflation Rate — 1.33 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00	Exchange Rate ($US/$Cdn)
						0.77 0.77 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76

Escalated at 2% per year thereafter

Weighted average historical prices realized by AOC for the year ended December 31, 2020, excluding price risk management activities, were $1.68/Mcf for conventional natural gas, $45.32/Bbl for light and medium crude oil and $11.93/Bbl for NGLs.

Reconciliation of Changes in Reserves

The following tables set forth a reconciliation of the gross reserves of AOC as at December 31, 2020, derived from the AOC Reserves Report using forecast prices and cost estimates, reconciled to the gross reserves of AOC as at December 31, 2019.

G-7

RECONCILIATION OF GROSS RESERVES BY PRODUCT TYPE FORECAST PRICES AND COSTS

December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Extensions & Improved Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Infill Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Technical Revisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Economic Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	LIGHT AND MEDIUM CRUDE OIL	LIGHT AND MEDIUM CRUDE OIL	LIGHT AND MEDIUM CRUDE OIL	LIGHT AND MEDIUM CRUDE OIL
	Proved (MBbls) 5,565 53 — 575 2,204 (549) (607) 7,241	Probable (MBbls) 4,450 36 — (240) 661 71 — 4,978	Proved Plus Probable (MBbls)
				10,015 89 — 335 2,865 (478) (607) 12,219

December 31, 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Extensions & Improved Recovery . . . . . . . . . . . . . . . . . . . . . . . . . Infill Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Technical Revisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Economic Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	CONVENTIONAL NATURAL GAS (2) Proved (MMcf) Probable (MMcf) Proved Plus Probable (MMcf) 5,241 4,929 10,170 89 368 457 — — — 3,644 745 4,389 1,453 385 1,838 (974) 63 (911) (622) — (622) 8,831 6,490 15,321	CONVENTIONAL NATURAL GAS (2) Proved (MMcf) Probable (MMcf) Proved Plus Probable (MMcf) 5,241 4,929 10,170 89 368 457 — — — 3,644 745 4,389 1,453 385 1,838 (974) 63 (911) (622) — (622) 8,831 6,490 15,321	CONVENTIONAL NATURAL GAS (2) Proved (MMcf) Probable (MMcf) Proved Plus Probable (MMcf) 5,241 4,929 10,170 89 368 457 — — — 3,644 745 4,389 1,453 385 1,838 (974) 63 (911) (622) — (622) 8,831 6,490 15,321	CONVENTIONAL NATURAL GAS (2) Proved (MMcf) Probable (MMcf) Proved Plus Probable (MMcf) 5,241 4,929 10,170 89 368 457 — — — 3,644 745 4,389 1,453 385 1,838 (974) 63 (911) (622) — (622) 8,831 6,490 15,321		NGLs
		Proved (MMcf) 5,241 89 — 3,644 1,453 (974) (622) 8,831	Probable (MMcf) 4,929 368 — 745 385 63 — 6,490		Proved (MBbls) 527 7 — 726 16 (95) (54) 1,127	Probable (MBbls) 478 29 — 243 4 3 — 757	Proved Plus Probable (MBbls)
								1,005 36 — 969 20 (92) (54) 1,884

Notes:

(1) The acquisitions amount is the estimate of reserves at December 31, 2020 plus any production since the acquisition dates.

(2) Includes coal bed methane and solution gas volumes.

ADDITIONAL INFORMATION RELATING TO RESERVES DATA

Undeveloped Reserves

Undeveloped reserves are attributed by Sproule in accordance with standards and procedures contained in the COGE Handbook. Proved undeveloped reserves are those reserves that can be estimated with a high degree of certainty and are expected to be recovered from known accumulations where a significant expenditure is required to render them capable of production. Probable undeveloped reserves are those reserves that are less certain to be recovered than proved reserves and are expected to be recovered from known accumulations where a significant expenditure is required to render them capable of production.

All of AOC’s proved undeveloped reserves are in its core areas where it is actively spending capital to develop those properties. As such, should the Arrangment not be completed, AOC would expect that the large majority of its booked undeveloped projects would be completed within a two year time frame and that substantially all of its currently booked undeveloped projects would be completed within a five year time frame. For more information, see “ Future Development Costs ” below. There are a number of factors that could result in delayed or cancelled development, including the following: (i) changing economic conditions (due to pricing, operating and capital expenditure fluctuations); (ii) changing technical conditions (including production anomalies, such as water breakthrough or accelerated depletion); (iii) multi-zone developments (for instance, a prospective formation completion may be delayed until the initial completion is no longer economic); (iv) a larger development program may need to be spread out over several years to optimize capital allocation and facility utilization; and (v) surface access issues (including those relating to land owners, weather conditions and regulatory approvals).

Proved Undeveloped Reserves

The following table discloses, for each product type, the volumes of proved undeveloped reserves that were attributed in each of the most recent three financial years.

G-9

Year 2018 2019 2020	Light and Medium Crude Oil (MBbls) First Attributed Booked Gross 705 3,250 540 3,747 — 4,262	NGLs (MBbls)	Booked Gross 289 314 933	Solution Gas(1) (MMcf) First Attributed Booked Gross 1,241 3,403 24 2,620 — 6,059	Total Equivalent (MBOE)	Total Equivalent (MBOE)
	First Attributed 705 540 —	First Attributed 164 1 —		First Attributed 1,241 24 —	First Attributed 1,076 545 —	Booked Gross
						4,106 4,498 6,205

Note:

(1) Includes coal bed methane reserves which do not comprise a material portion of AOC’s total reserves.

Proved undeveloped reserves have been assigned in areas where the reserves can be estimated with a high degree of certainty. In most instances, proved undeveloped reserves will be assigned on lands immediately offsetting existing producing wells within the same accumulation or pool. Sproule has assigned 6,205 Mboe of proved undeveloped reserves in the AOC Reserves Report with $94.1 million of associated undiscounted capital, of which $55.8 million is forecast to be spent in the first two years of development.

Probable Undeveloped Reserves

The following table discloses, for each product type, the volumes of probable undeveloped reserves that were first attributed in each of the most recent three financial years.

Year 2018 2019 2020	Light and Medium Crude Oil (MBbls) First Attributed Booked Gross 1,525 3,948 363 3,577 — 3,602	NGLs (MBbls)	Booked Gross 357 345 608	Solution Gas(1) (MMcf) First Attributed Booked Gross 1,800 4,197 183 3,268 — 4,514	Total Equivalent (MBOE)	Total Equivalent (MBOE)
	First Attributed 1,525 363 —	First Attributed 173 14 —		First Attributed 1,800 183 —	First Attributed 1,997 408 —	Booked Gross
						5,005 4,467 4,962

Note:

(1) Includes coal bed methane reserves which do not comprise a material portion of AOC’s total reserves.

Probable undeveloped reserves have been assigned in areas where the reserves can be estimated with less certainty. In most instances probable undeveloped reserves have been assigned on lands in the area with existing producing wells but there is some uncertainty as to whether they are directly analogous to the producing accumulation or pool. Sproule has assigned 4,962 Mboe of probable undeveloped reserves in the AOC Reserves Report. Sproule assigned $144.6 million of associated undiscounted capital in the proved plus probable undeveloped category, of which $80.1 million is forecast to be spent in the first two years of development.

Significant Factors or Uncertainties Affecting Reserves Data

Changes in future commodity prices relative to the forecasts provided under “ Pricing Assumptions – Forecast Prices and Costs ” above could have a negative impact on AOC reserves and in particular the development of AOC undeveloped reserves unless future development costs are adjusted in parallel. AOC reserves can also be affected significantly by fluctuations in capital expenditures, operating costs, royalty regimes, abandonment and reclamation costs and well performance that are beyond AOC’s control.

Abandonment and Reclamation Costs

In connection with AOC’s operations, AOC will incur abandonment and reclamation costs for surface leases, wells, facilities and pipelines. AOC’s overall abandonment and reclamation costs include all costs associated with the process of restoring a property that has been disturbed by oil and gas activities to the standard imposed by the applicable government or regulatory authorities.

Sproule included well abandonment and reclamation costs for 237.9 net (396 gross) wells and locations under the proved reserves category of $23.2 million undiscounted ($6.2 million discounted at 10%) in the AOC Reserves Report, none of which is expected to be incurred from 2021 to 2024. Sproule included well abandonment and reclamation costs for 296.0 net (487 gross) wells and locations under the total proved plus probable reserves category of $28.4 million undiscounted ($6.1 million discounted at 10%) in the AOC Reserves Report, none of which is expected to be incurred from 2021 to 2024.

The above well abandonment and reclamation costs from the AOC Reserves Report include $6.9 million undiscounted ($1.1 million discounted at 10%) for 85.1 net (111 gross) future proved undeveloped locations and $10.9 million undiscounted ($1.6 million discounted at 10%) for 127.0 net (160 gross) future proved plus probable undeveloped locations.

G-10

The future net revenues disclosed in this Appendix G are based on the AOC Reserves Report and contain an allowance for salvage, abandonment and reclamation costs for surface leases, facilities and pipelines as well as abandonment and disconnect cost for wells to which reserves were not assigned (i.e. shut-in, suspended, injection and/or service wells).

Future Development Costs

The table below sets out the total development costs deducted in the estimation in the AOC Reserves Report of future net revenue attributable to proved reserves and proved plus probable reserves (using forecast prices and costs).

Year 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TOTAL UNDISCOUNTED . . . . . . . . . . . . . . . . . . . . . .	FORECAST PRICES AND COSTS	FORECAST PRICES AND COSTS	FORECAST PRICES AND COSTS
	Proved Reserves ($000s) 33,933 22,172 17,559 9,107 4,820 2,504 4,348 94,443	Proved Plus Probable Reserves ($000s)
			52,873 28,025 27,422 25,413 4,820 2,504 4,348 145,405

AOC expects to fund the development costs of its reserves through a combination of internally generated cash flow, debt and equity issuances. There can be no guarantee that funds will be available or that the AOC Board will allocate funding to develop all of the reserves attributed in the AOC Reserves Report. Failure to develop those reserves could have a negative impact on AOC’s future cash flow.

Interest or other costs of external funding are not included in AOC’s reserves and future net revenue estimates and would reduce reserves and future net revenue to some degree depending upon the funding sources utilized. The cost of the debt component for funding future development costs is expected to be minimal and to not materially impact the disclosed reserves or future net revenue.

OTHER OIL AND NATURAL GAS INFORMATION

Oil and Natural Gas Wells

The following table summarizes, as at December 31, 2020, AOC’s interests in producing wells and in non-producing wells along with its interests in unproved properties (as defined by NI 51-101).

Oil Wells Producing Non-Producing Gross Net Gross Net 8 8.0 5 5.0 118 92.9 83 46.2 127 96.7 6 6.0 253 197.6 94 57.2	Unproved Properties (acres)	Unproved Properties (acres)
Producing Gross Net 8 8.0 118 92.9 127 96.7 253 197.6
Gross 8 118 127 253	Gross 13,520 48,772 1,973 64,265	Net
		13,484 41,370 1,949
		56,803

Significant Factors or Uncertainties Relevant to Properties with no Attributed Reserves

AOC does not anticipate that any significant economic factors or significant uncertainties will affect any particular components of its properties with no attributed reserves. However, AOC’s decision to develop its properties with no attributed reserves can be affected significantly by fluctuations in product pricing, capital expenditures, operating costs and royalty regimes, all of which are beyond its control. There are no unusually significant abandonment and reclamation costs with AOC’s properties with no attributed reserves.

Forward Contracts

AOC is exposed to market risks resulting from fluctuations in commodity prices, foreign exchange rates and interest rates in the normal course of operations. A variety of derivative instruments may be used by AOC from time to time to reduce AOC’s exposure to fluctuations in commodity prices and foreign exchange rates. AOC is exposed to losses in the event of default by the counterparties to such derivative instruments. AOC manages this risk by entering into these derivative instruments with financially sound counterparties.

AOC may use certain financial instruments to hedge exposure to commodity price fluctuations on a portion of its crude oil and natural gas production. The AOC Board has approved a price risk management limit of up to 70% of the forecast production, net of royalties, using fixed price swaps, costless collars, physical contracts and option contracts.

G-11

Below is a summary of the hedging agreements AOC currently has in place.

Execution Date September 1, 2020 September 1, 2020 September 3, 2020 January 5, 2021 January 19, 2021 February 10, 2021 February 17, 2021 February 26, 2021 March 5, 2021	Term Total Days Counterparty 1-Jan-21 – 31-Dec-21 365 NBC 1-Apr-21 – 31-Dec-21 275 NBC 1-Jan-21 – 31-Dec-21 365 NBC 1-Apr-21 – 30-Jun-21 91 NBC 1-Jul-21 – 31-Dec-21 184 NBC 1-Jan-22 – 30-Jun-22 181 NBC 1-Jul-22 – 31-Dec-22 184 NBC 1-Mar-21 – 31-Dec-21 306 NBC 1-Jan-22 – 31-Dec-22 365 NBC	Type Of Hedge Swap—WTI CDN Swap—WTI CDN Swap—WTI CDN Swap – WTI CDN Swap – WTI CDN Swap – WTI CDN Swap – WTI CDN Swap – MSW Differential CDN Swap – WTI CDN	Volumes (bbl/d) 400 500 200 500 500 500 500 1,100 500	Absolute Volumes 146,000 137,500 73,000 45,500 92,000 90,500 92,000 336,600 182,500	Price (CAD)
					58.60 58.70 56.45 62.50 64.33 66.82 66.22 (7.63) 72.53

Costs Incurred

The following table summarizes the cash costs incurred related to AOC’s activities for the year ended December 31, 2020.

Expenditure Development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Year Ended December 31, 2020 ($000s)	Year Ended December 31, 2020 ($000s)
		13,336 1,157 14,493(1)

Note:

(1) Does not include debt assumed or a value for shares issued in relation to the Corval Arrangement.

Exploration and Development Activity

The following table sets forth the gross and net development wells drilled by AOC during the year ended December 31, 2020. All wells were drilled in Canada.

Total Oil Wells . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	TOTAL DEVELOPMENT WELLS	TOTAL DEVELOPMENT WELLS
	Gross 9	Net
		6.25

Note:

(1) AOC did not drill any gas, service or stratigraphic wells nor any dry holes during the year ended December 31, 2020. (2) AOC did not drill any exploratory wells during the year ended December 31, 2020.

AOC drilled 9 gross (6.25 net) wells in the year ending 2020. This development activity further delineated and de-risked the opportunity in the area.

Production Estimates

The following table discloses for each product type the total volume of production estimated by Sproule in the AOC Reserves Report for 2021 in the estimates of future net revenue from gross proved and gross proved plus probable reserves disclosed above.

PROVED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PROVED PLUS PROBABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Light and Medium Crude Oil (Bbls/d) 3,363 4,769	NGLs (Bbls/d) 536 769	Conventional Natural Gas (Mcf/d) 3,410 5,029	Total Oil Equivalent (Boe/d)
				4,467 6,376

G-12

Production Volume by Field

The following table indicates the average daily net production from AOC’s major fields for the year ended December 31, 2020.

Crossfield(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stanmore(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pinto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Steelman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Viewfield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sinclair/Daly(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Light and Medium Crude Oil (Bbls/d) 3 3 223 480 716 167 52 1,644	NGLs (Bbls/d) — 1 — 126 19 — — 146	Conventional Natural Gas (Mcf/d) — 6 — 1,548 138 — — 1,692	Total Oil Equivalent (Boe/d) 3 5 223 864 758 167 52 2,072	Percentage (%)
					92 61 100 70 97 100 100 86

Note:

(1) AOC’s properties in Alberta and Manitoba were acquired in connection with the Corval Arrangement, which was completed on December 8, 2020. Accordingly the information provided relates to production from December 8, 2020, to December 31, 2020 averaged over the full 2020 year.

Production History

The following table discloses, on a quarterly basis for the year ended December 31, 2020, certain information in respect of production, product prices received, royalties paid and operating expenses attributable to AOC’s assets.

Average Daily Production (1) Light and Medium Crude Oil (Bbls/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NGLs (Bbls/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conventional Natural Gas (MMcf/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Combined (Boe/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Average Net Production Prices Received Light and Medium Crude Oil ($/Bbl) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NGLs ($/Bbl) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conventional Natural Gas ($/Mcf) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Combined ($/Boe) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Royalties Paid Light and Medium Crude Oil ($/Bbl) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NGLs ($/Bbl) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conventional Natural Gas ($/Mcf) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Combined ($/Boe) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Production Costs (2)(3) Light and Medium Crude Oil ($/Bbl) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NGLs ($/Bbl) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conventional Natural Gas ($/Mcf) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Combined ($/Boe) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Quarter Ended 2020	Quarter Ended 2020	Quarter Ended 2020	Dec. 31 2,553 204 2,611 3,192 47.12 10.01 2.06 40.01 — — — 6.13 — — — 10.60	Year Ended Dec. 31, 2020
	Mar. 31 2,723 227 2,313 3,336 47.07 8.04 1.44 39.97 — — — 6.52 — — — 9.92	June 30 417 68 694 601 23.48 (1.61) 1.06 17.35 — — — 2.67 — — — 13.98	Sept. 30 875 87 1,166 1,156 45.02 6.78 1.66 36.25 — — — 6.31 — — — 17.37
					1,643 146 1,698 2,072 45.32 7.43 1.68 37.83 — — — 6.06 — — — 11.52

Notes:

(1) Before the deduction of royalties.

(2) Production costs are composed of direct costs incurred to operate both oil and gas wells. A number of assumptions are required to allocate these costs between product types.

(3) Operating recoveries associated with operated properties are charged to production costs and accounted for as a reduction to general and administrative costs.

SELECTED FINANCIAL INFORMATION

Financial Information

The following is a summary of certain selected financial and production information for AOC for the periods indicated. The following information should be read in conjunction with the audited annual financial statements of AOC for the years ended December 31, 2020, 2019 and 2018 and the unaudited interim financial statements of AOC for the three months ended March 31, 2020 and for the three months ended March 31, 2021 attached as Schedules A and B, respectively, to this Appendix G.

G-13

Oil and natural gas sales (M$) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) per basic share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets (M$) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities (M$) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total shareholders’ equity (M$) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Three Months Ended March 31 2021 2020 (unaudited) (unaudited) 18,809 11,688 (2,232) (2,542) (0.03) (0.05) 179,351 129,163 53,620 40,104 125,731 89,059	Year Ended December 31,	Year Ended December 31,	Year Ended December 31,
	2021 (unaudited) 18,809 (2,232) (0.03) 179,351 53,620 125,731	2020 27,309 15,112 0.27 173,272 45,309 127,963	2019 62,036 10,916 0.20 131,080 39,481 91,599	2018
				60,945 12,953 0.25 112,584 39,501 73,083

Financial Statements

The audited annual financial statements of AOC as at and for the years ended December 31, 2020, 2019 and 2018, together with the notes thereto and the auditors’ reports thereon and the interim unaudited interim financial statements of AOC for the three-month period ended March 31, 2021, together with the notes thereto are set forth in Schedules A and B to this Appendix G, respectively.

DIVIDENDS

AOC has not paid any dividends on the AOC Shares. Any decision to pay dividends on the AOC Shares will be made by the AOC Board on the basis of AOC’s earnings, financial requirements and other conditions existing at such future time subject to compliance with Applicable Laws.

DISCLOSURE OF OUTSTANDING SECURITY DATA

The authorized capital of AOC consists of an unlimited number of AOC Shares, an unlimited number of preferred shares and an unlimited number of series 1 special voting shares. As of the date hereof, there are 68,006,231 AOC Shares and no other shares issued and outstanding. As of the date hereof, 10,999,998 AOC Performance Warrants entitling the holders thereof to purchase an equivalent number of AOC Shares and 6,799,000 AOC Options to purchase AOC Shares are outstanding. For a description of the material attributes and characteristics of the AOC Shares, see “ Description of AOC Shares ” in this Appendix G.

CONSOLIDATED CAPITALIZATION

The following table sets forth the capitalization of AOC for the three months ended March 31, 2021 before giving effect to the Arrangement. This table should be read in conjunction with the audited annual financial statements of AOC as at and for the years ended December 31, 2020, 2019 and 2018 and unaudited interim financial statements of AOC for the three-month period ended March 31, 2021 and the accompanying notes thereto attached as Schedules A and B to this Appendix G, respectively:

Description Share Capital AOC Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loan Capital AOC Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Amount Authorized Unlimited $40,000,000	As at March 31, 2021, before giving effect to the Arrangement
		68,006,231 ($78,027,000)(1) $ 15,553,000

Notes:

(1) As at the date hereof, 6,799,000 AOC Shares are reserved for issuance on the exercise of AOC Options and 10,999,998 AOC Shares are reserved for issuance on the exercise of AOC Performance Warrants.

OPTIONS TO PURCHASE SECURITIES

The following table sets forth certain information in respect of the AOC Options that are outstanding as of the date hereof.

Group (Number in Group) Current and past executive officers (5) . . . . . . . . . . . . . . . . .	AOC Shares Under Option (#) 4,220,700 275,000	Exercise Price per AOC Share ($) 1.00 1.20	Expiration Date
			October 1, 2022 April 12, 2026

G-14

Group (Number in Group) Current and past directors, excluding . . . . . . . . . . . . . . . . . . . current officers (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current and past employees (4) . . . . . . . . . . . . . . . . . . . . . . . . Consultants or other service providers (2) . . . . . . . . . . . . . . . . All other persons or companies (1) . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	AOC Shares Under Option (#) 569,500 65,000 593,800 649,000 200,000 50,000 100,000 66,000 10,000 6,799,000	Exercise Price per AOC Share ($) 1.00 1.20 1.00 1.20 1.20 1.00 1.20 1.00 1.20	Expiration Date
			October 1, 2022 April 12, 2026 October 1, 2022 April 12, 2026 May 10, 2026 October 1, 2022 April 12, 2026 October 1, 2022 April 12, 2026

Note:

(1) The market value of the AOC Shares underlying the AOC Options on both the date of grant and the date of this Information Circular is not reasonably ascertainable given that the AOC Shares are not and have never been publicly listed or traded on a recognized stock exchange.

The following table sets forth certain information in respect of the AOC Performance Warrants that are outstanding as of the date hereof.

Group (Number in Group) Current and past executive officers (5) . . . . . . . . . . . . . . . . . . . . . Current and past directors, excluding . . . . . . . . . . . . . . . . . . . . . . current officers (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current and past employees (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . Consultants or other service providers . . . . . . . . . . . . . . . . . . . . . All other persons or companies (1) . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	AOC Shares issuable under AOC Performance Warrants (#) 9,028,800 1,075,198 776,533 — 119,467 10,999,998	Exercise Price per AOC Share ($) 1/5th at each $1.50/$1.75/$2.00/$2.25/$2.50 1/5th at each $1.50/$1.75/$2.00/$2.25/$2.50 1/5th at each $1.50/$1.75/$2.00/$2.25/$2.50 n/a 1/5th at each $1.50/$1.75/$2.00/$2.25/$2.50	Expiration Date
			October 1, 2022 October 1, 2022 October 1, 2022 n/a October 1, 2022

Note:

(1) The market value of the AOC Shares underlying the AOC Performance Warrants on both the date of grant and the date of this Information Circular is not reasonably ascertainable given that the AOC Shares are not and have never been publicly listed or traded on a recognized stock exchange.

AOC Option Plan

AOC Options are granted pursuant to the AOC Option Plan. The purpose of the AOC Option Plan is generally to provide incentives to the directors, officers, employees, consultants and other personnel of AOC to achieve long-term objectives of AOC and to attract and retain the employ of AOC by providing such persons with the opportunity to acquire an increased proprietary interest in AOC. Under the AOC Option Plan, AOC may enter into option agreements with eligible grantees pursuant to which AOC may grant AOC Options to such grantees. Each AOC Option entitles the holder thereof to acquire 1.0 AOC Share.

G-15

AOC Options have dual vesting requirements, vesting: (i) at a rate of 0.1% for every $55,000 invested in AOC Shares by the holder of AOC Options pursuant to the private placement of units each comprised of 1.0 AOC Share, 19 series 1 special voting shares and 19 call obligations completed by AOC in 2014 (the “ Private Placement ”); and (ii) one-third on each of the first three anniversaries of their date of grant, subject to immediate vesting upon the occurrence of certain liquidity events.

The number of authorized but unissued AOC Shares that may be issued upon exercise of AOC Options at any time plus the number of AOC Shares reserved for issuance under outstanding incentive stock options otherwise granted by AOC shall not exceed 10% of the aggregate number of the issued and outstanding AOC Shares.

AOC Options and all rights pursuant thereto are set forth in respective stock option agreements entered into between AOC and each grantee of such AOC Options. Unless otherwise determined by the AOC Board the exercise price of each Option granted under the AOC Option Plan shall be the greater of: (i) the fair market value of the AOC Shares at the time of grant of such AOC Option; and (ii) $1.00 per AOC Share. AOC Options expire five years after issuance subject to the extension of the expiry date at the AOC Board’ discretion. In the event that the expiry date of an AOC Option is extended by the AOC Board to a date later than the 8th anniversary of the grant date of such AOC Option, the exercise price of such AOC Option increases by 8% on the 8th anniversary of such grant date and by a further 8% (compounded) on each subsequent anniversary of such grant date. On September 25, 2019, the AOC Board extended the expiry date of the AOC Options from October 1, 2019 to October 1, 2022 with no change in exercise price.

As of the date hereof, 6,799,000 AOC Options are issued and outstanding.

AOC Performance Warrants

AOC Performance Warrants are issued pursuant to the terms set out in the certificates issued to holders thereof (“ AOC Performance Warrants Certificates ”).

Under AOC’s Shareholder’s Agreement (see “ Material Contracts ” in this Appendix G), AOC may issue up to 11,000,000 AOC Performance Warrants. The AOC Performance Warrants are issuable in five series (each a “ Series ”), with 20% of the total number of AOC Performance Warrants issued to a holder in each Series. Holders of AOC Performance Warrants are entitled to purchase one AOC Share for each AOC Performance Warrant held at the following exercise prices:

Series 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Exercise Price ($)
	1.50 1.75 2.00 2.25 2.50

AOC Performance Warrants expire five years after issuance subject to the extension of the expiry date by the AOC Board and vest: (i) at a rate of 0.1% for every $55,000 invested in AOC Shares pursuant to the Private Placement; and (ii) upon certain liquidity events. The terms of the AOC Performance Warrants provide that if the AOC Board extends the expiry date of the AOC Performance Warrants, the exercise price for each Series will increase by 8% on the fifth anniversary and every annual anniversary thereafter. On September 25, 2019, the AOC Board extended the expiry date of the AOC Performance Warrants from October 1, 2019 to October 1, 2022 with no change in exercise price.

As at the date hereof, 10,999,998 AOC Performance Warrants are issued and outstanding.

DESCRIPTION OF AOC SHARES

Holders of AOC Shares are entitled to one vote per share at meetings of AOC Shareholders, to receive dividends if, as and when declared by the AOC Board and to receive rateably the remaining property and assets of AOC upon its liquidation, dissolution, winding-up or other distribution of assets of AOC for the purposes of winding-up its affairs, subject to the rights of shares having priority over the AOC Shares.

PRIOR SALES

On December 8, 2020, in connection with the Corval Arrangement, AOC issued 12,140,931 AOC Shares to the former holder of the common shares of Corval, other than any dissenting shareholders.

On April 12, 2021, AOC granted 1,099,000 AOC Options to various directors and certain officers and certain employees of AOC.

On May 10, 2021, AOC granted 200,000 AOC Options to an employee in connection with the commencement of his employment with AOC.

AOC did not otherwise issue any AOC Shares or securities convertible into AOC Shares within the 12-month period prior to the date hereof.

G-16

PRINCIPAL SECURITYHOLDERS

To the best of the knowledge of AOC’s directors and executive officers, the only AOC Shareholders that beneficially own, directly or indirectly, or exercise control or direction over AOC Shares carrying more than 10% of the votes attached to all of the issued and outstanding AOC Shares as of the date of this Information Circular, are as set forth in the following table.

Name Camcor Partners Fund VII GP Inc.(1)(2) . . . . . . . Annapolis Investment Limited Partnership VI(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annapolis Investment (US) Limited Partnership VI(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Number of AOC Shares Owned/Controlled 20,000,000 14,923,938 10,045,007	Percentage of Outstanding Class of AOC Shares
		29.41% (23.3% fully diluted basis) 21.95% (17.4% fully diluted basis) 14.77% (11.7% fully diluted basis)

Notes:

(1) Camcor Partners Fund VII GP Inc. (“ Camcor GP ”) is the general partner of Camcor Energy Fund VII-A LP (“ Camcor VII-A ”), Camcor Energy Fund VII-A2 LP (“ Camcor VII-A2 ”) and Camcor Energy Fund VII-B LP (“ Camcor VII-B ”), each a limited partnership subsisting under the laws of the Province of Alberta (collectively “ Camcor Energy Fund VII ”). Of the 20,000,000 AOC Shares registered in the name of Camcor GP, Camcor VII-A is the beneficial holder of 4,611,428 AOC Shares, Camcor VII-A2 is the beneficial holder of 5,714,286 AOC Shares and Camcor VII-B is the beneficial holder of 9,674,286 AOC Shares.
(2) Ian Fergusson and Cameron McVeigh, directors of AOC, are both Managing Directors of Camcor GP.
(3) Jody Forsyth, a director of AOC, is a Managing Partner of Annapolis, the manager of Annapolis Investment Limited Partnership VI and Annapolis Investment (US) Limited Partnership VI.

DIRECTORS AND OFFICERS

Name, Occupation and Security Holding

The table set forth below lists the names of the current directors and executive officers of AOC, their municipalities of residence, positions and offices with AOC, and principal occupations.

Name, Province of Residence and Position with AOC Ian Fergusson(1)(2)(3) Alberta, Canada Director Jody Forsyth(2)(3) Alberta, Canada Director Ingram Gillmore(1)(2) Alberta, Canada Director Andrew Greenslade Alberta, Canada President, Chief Executive Officer and Director	Principal Occupation Joined Camcor Partners Inc. in 1998 and is currently Managing Director and a member of the Investment Committee; prior thereto, he was employed with an international chartered accountancy firm for four years in Canada and Australia working in the areas of taxation and audit; he currently represents Camcor Partners Inc. interests on numerous boards of directors related to Camcor fund investments. Co-founded Annapolis Capital Limited in 2006 where he has served as a Managing Partner since that time. For the 11 years prior thereto, Mr. Forsyth served as an officer or director of, and consulted to, numerous public and private oil and gas companies. Mr. Forsyth currently serves as a director of two other private oil and gas companies. President, Chief Executive Officer and a director of Gear Energy Ltd., an exploration and production company, since May, 2010; prior thereto, Vice President, Engineering at ARC Resources Ltd. from January, 2007 to May, 2010; prior thereto, Manager, Engineering of ARC Resources Ltd. from July 2005 to December, 2006; prior thereto, Exploitation Engineer of ARC Resources Ltd. from November, 2002 to June, 2005. President, Chief Executive Officer and a director of AOC since April 1, 2014; prior thereto, Interim Chief Executive Officer of Renegade Petroleum Ltd. from October, 2013; prior thereto, held various engineering and operations roles with senior Canadian producers.	Position Held Since
		October 1, 2014 October 1, 2014 November 14, 2014 April 1, 2014

G-17

Name, Province of Residence and Position with AOC Cameron McVeigh Alberta, Canada Director Herbert Pinder(3) Saskatchewan, Canada Director Al Schink(1) Alberta, Canada Director Mark Lobello Alberta, Canada Vice President, Finance and Chief Financial Officer Jason Ellithorpe Alberta, Canada Vice President, Engineering Russ Walz Alberta, Canada Vice President, Exploration Shaun Thiessen Alberta, Canada Vice President, Land and Business Development P.L. (Lonny) Tetley Alberta, Canada Corporate Secretary	Principal Occupation Founder of Camcor Partners Inc. in 1997 and is currently Managing Director and a member of the Investment Committee thereof; prior thereto, he was employed with two international chartered accountancy firms practicing in the areas of taxation, insolvency and corporate finance. Mr. McVeigh currently represents Camcor Partners Inc. interests on numerous boards of directors related to Camcor fund investments. President of Goal Group, a private equity management firm located in Saskatoon, Saskatchewan since 1984; prior thereto, managed a family business, Pinder Drugs, as President; currently Chairman of Cavalier Enterprises Ltd., a hotel chain, since 1990. Independent businessman; prior thereto, Senior Technical Advisor of Annapolis Capital Limited from 2008 to May, 2016; prior thereto, co-founder, President and Chief Executive Officer of Berland Exploration Ltd., a private oil and gas company, between 2003 and 2006. Mr. Schink also served as Vice President of a number of public and private Canadian oil and gas companies, including Canadian Hunter Exploration Ltd., Burlington Canada Resources Ltd., and Berens Energy Ltd. Vice President, Finance and Chief Financial Officer of AOC since April 1, 2014. Vice President, Engineering of AOC since July 27, 2016; prior thereto Engineering Manager at AOC. Vice President, Exploration of AOC since April 1, 2014. Vice President, Land and Business Development of AOC since January 20, 2015. Partner in the corporate finance and securities group of Burnet, Duckworth & Palmer LLP since December, 2015; prior thereto an associate with Burnet, Duckworth & Palmer LLP.	Position Held Since
		June 22, 2015 October 1, 2014 November 12, 2015 April 1, 2014 July 27, 2016 April 1, 2014 January 20, 2015 April 1, 2014

Notes:

(1) Member of the Reserves, Health, Safety and Environmental Committee of the AOC Board.

(2) Member of the Audit Committee of the AOC Board.

(3) Member of the Compensation and Governance Committee of the AOC Board.

The directors and executive officers of AOC beneficially own, directly or indirectly, or exercise control or direction over, as a group, an aggregate of 47,746,845 AOC Shares, being 70.2% of the outstanding AOC Shares. See “ Principal Securityholders ” in this Appendix G.

The term of each of the directors expires at the next annual meeting of AOC Shareholders.

Corporate Cease Trade Orders and Bankruptcies

No current or proposed director is, or has been within the past 10 years, a director, chief executive officer or chief financial officer of any company (including AOC) that was subject to a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation for a period of more than 30 consecutive days: (i) that was issued while such person was acting in that capacity; or (ii) that was issued after such person ceased to be a director, chief executive officer or chief financial officer of that company and which resulted from an event that occurred while that person was acting in that capacity.

G-18

Except as disclosed below, no current or proposed director of AOC is, or has been within the past 10 years, a director or executive officer of any company (including AOC) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.

Mr. Ian Fergusson, one of the directors of AOC, was formerly a director of Nordegg Resources Inc. (“ Nordegg ”), a private oil and natural gas exploration and development company. Mr. Fergusson ceased acting as a director of Nordegg on June 23, 2015, when Mr. Fergusson did not stand for re-election as a director. Nordegg had a receiver manager appointed over its assets on June 16, 2016.

Personal Bankruptcies

No current or proposed director of AOC has, within the past 10 years, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director.

Penalties and Sanctions

No current or proposed director has been subject to: (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (ii) any penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a proposed director.

Conflicts of Interest

There are potential conflicts of interest to which the directors and/or executive officers of AOC are subject with respect to the operations of AOC. The directors and/or officers of AOC may also be directors and/or officers of other oil and gas companies or otherwise involved in natural resource exploration and development and situations may arise where they are in a conflict of interest with AOC, or have significant shareholdings in other companies. Situations may arise where the directors and/or officers of AOC will be engaged in direct competition with AOC. Conflicts of interest, if any, which arise will be subject to and governed by procedures prescribed by the ABCA, which require a director or officer of a corporation who is a party to, or is a director or an officer of, or has a material interest in any person who is a party to, a material contract or proposed material contract with AOC, to disclose his or her interest, and in certain cases, to refrain from voting on any matter in respect of such contract unless otherwise permitted under the ABCA.

See also “ Interest of Management and Others in Material Transactions ” in the accompanying Information Circular.

INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

There exists no indebtedness of the directors or executive officers of AOC, or any of their associates, to AOC, nor is any indebtedness of such directors or executive officers to another entity the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by AOC.

AUDIT COMMITTEE & CORPORATE GOVERNANCE DISCLOSURE

Audit Committee

The following three (3) directors are members of AOC’s Audit Committee:

Jody Forsyth Ingram Gillmore Ian Fergusson

All of the members of the Audit Committee are financially literate and independent.

Audit Committee Charter

A copy of the Audit Committee Charter is attached to this Appendix G as Schedule D.

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Relevant Education and Experience of Audit Committee Members

Mr. Fergusson (Chair)

Mr. Fergusson received his Bachelor of Commerce from the University of Calgary in 1993 and earned his Chartered Accountant Designation in 1996 and his Chartered Financial Analyst Designation in 2001. He is currently a member of the Institute of Chartered Accountants of Alberta and the Canadian Institute of Chartered Accountants.

For a summary of Mr. Fergusson’s relevant professional experience, see “ Directors and Officers ” in this Appendix G.

Mr. Forsyth

Mr. Forsyth received his Bachelor of Science (Mathematics) and Diploma of Engineering in 1985 and a Bachelor of Laws and MBA in 1989, all from Dalhousie University. Mr. Forsyth completed a Master of Laws in 2008 at Osgoode Hall Law School.

For a summary of Mr. Forsyth’s relevant professional experience, see “ Directors and Officers ” in this Appendix G.

Mr. Gillmore

Mr. Gillmore received his Bachelor of Applied Science (Chemical Engineering) from the University of Waterloo in 1991 and obtained a Bachelor of Fine Arts in 1996 from the Alberta College of Art and Design.

For a summary of Mr. Gillmore’s relevant professional experience, see “ Directors and Officers ” in this Appendix G.

External Auditor Service Fees

AOC’s external auditors are KPMG LLP, Chartered Professional Accounts, Calgary, Alberta.

The AOC Board has reviewed the nature and amount of non-audit services provided by KPMG LLP to AOC to ensure auditor independence. Fees paid to KPMG LLP for audit and non-audit services in the last fiscal year are outlined in the following table:

Nature of Services Audit Fees(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax Fees(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All Other Fees(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	($) Fees Paid to KPMG LLP for the Year Ended December 31, 2020 $112,000 $ 50,000 $ 18,500 $180,500	($) Fees Paid to KPMG LLP for the Year Ended December 31, 2019	($) Fees Paid to KPMG LLP for the Year Ended December 31, 2019
			$ 90,000 $ 3,000 $ 23,500 $116,500

Notes:

(1) Audit fees include fees billed in connection with the annual audit of AOC’s financial statements.

(2) Tax fees include fees billed in connection with the preparation of Canadian tax returns and tax due diligence.

(3) Other fees include fees charged by the auditor relating to the quarterly reads of the interim consolidated financial statements and work performed on the adoption of new accounting standards.

Exemption

AOC relies on the exemption in section 6.1 of National Instrument 52-110 – Ongoing Requirements for Issuers and Insiders for the purposes of this disclosure.

AOC Board

The AOC Board currently consists of seven (7) directors, two of whom are independent and four of whom are unrelated. For the purposes of this Appendix G, an “unrelated director” is a director who is independent of management and is free from any interest or other relationship, which could reasonably be perceived to materially interfere with the director’s ability to act with a view to the best interests of the Corporation, other than interests and relationships arising from shareholding. AOC’s unrelated directors are the nominee directors of AOC’s founding shareholders managed by Annapolis Capital Limited and Camcor Partners Inc. Herbert Pinder and Ingram Gillmore are independent directors and Jody Forsyth, Ian Fergusson, Cameron McVeigh and Al Schink are unrelated directors. Andrew Greenslade is not an independent director or unrelated director as he is the President and Chief Executive Officer of the Corporation.

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For additional information about our directors, please see “ Directors and Officers ” above.

Directorships

The following directors of AOC are also presently directors of other issuers that are reporting issuers:

Name of Other Name of Director Issuer Ingram Gillmore Gear Energy Ltd.

Orientation and Continuing Education

While AOC does not currently have a formal orientation and education program for new recruits to the AOC Board, AOC provides such orientation and education on an informal basis. As new directors join the AOC Board, management provides these individuals with corporate policies, historical information about AOC, as well as information on AOC’s performance and its strategic plan with an outline of the general duties and responsibilities entailed in carrying out their duties. The AOC Board believes that this approach is practical and effective in light of AOC’s particular circumstances, including the size of AOC, limited changes to the directors comprising the AOC Board and the experience and expertise of the directors comprising the AOC Board.

Ethical Business Conduct

The AOC Board has adopted a Code of Business Conduct and Ethics, which requires the directors, officers and employees of AOC to adhere to certain ethical practices in all aspects of their duties. The Code of Business Conduct and Ethics addresses conflicts of interest, corporate opportunities, confidentiality, protection and proper use of corporate assets, fair dealing, legal and regulatory compliance, discrimination and harassment, privacy, safety and health, accuracy of reporting, political contributions and activities, illicit payments and payments to officials and reporting of illegal or unethical behavior.

The AOC Board believes that at the present time that the fiduciary duties placed on individual directors by AOC’s governing corporate legislation and the common law and the restrictions placed by applicable corporate legislation on an individual director’s participation in decisions of the AOC Board in which the director has an interest have been sufficient to ensure that the AOC Board operates independently of management and in the best interests of AOC.

In accordance with the ABCA, directors who are party to, or are a director or officer of a person which is a party to, a material contract or material transaction or a proposed material contract or a proposed material transaction with us are required to disclose the nature and extent of their interest and not to vote on any resolution to approve the contract or transaction.

Other Board Committees

In addition to an Audit Committee, the AOC Board has established the Compensation and Governance Committee (the “ Compensation Committee ”) and Reserves and Health, Safety and Environmental Committee (the “ Reserves Committee ”).

Compensation Committee

The Compensation Committee, composed entirely of independent or unrelated directors, is involved in the implementation and oversight of the human resources and compensation policies recommended by such committee, specifically those concerning executive compensation, employment agreements, stock option plans and performance warrants and those concerning proposed changes involving officers reporting to AOC’s President and Chief Executive Officer.

Reserves Committee

The function of the Reserves Committee is to review the results of engineering appraisals of AOC’s oil and gas reserves. The Reserves Committee’s responsibilities include, among other things, ensuring that AOC’s reserves are assessed in a reasonable and consistent manner to provide a satisfactory level of confidence for all stakeholders and the public and ensuring that the disclosure, if applicable, relating to the same is accurate and timely. The Reserves Committee also reviews AOC’s fundamental policies pertaining to environment, health and safety and ascertains that policies and procedures are in place to minimize environmental, occupational health and safety and other risks to asset value and mitigate damage to or deterioration of asset value.

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ESCROWED SECURITIES

As of the date hereof, no AOC Shares are held in escrow pursuant to any escrow agreement.

In connection with the Arrangement, an aggregate of 37,746,845 AOC Shares, 5,206,200 AOC Options and 4,089,386 AOC Performance Warrants will be subject to restrictions on transfer, as further described in the accompanying Information Circular under “ The Arrangement – AOC Supporting Shareholders ”.

RISK FACTORS

Certain risk factors related specifically to the Arrangement are set forth under the heading “ Risk Factors ” in the accompanying Information Circular. Further, certain risk factors relating to the activities of Surge and the ownership of Surge Shares are described under the heading “ Risk Factors ” in Appendix H – “ Information Concerning Surge Energy Inc. ” Additional risk factors are described in the Surge AIF and in the Surge Annual Financial Statements, which are specifically incorporated by reference into the accompanying Information Circular, Appendix H and this Appendix G. Management of AOC has identified that the following risk factors also apply to AOC’s business and the ownership of AOC Shares.

AOC’s financial condition, results of operations and cash flow

Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas and technological advances in fuel economy and renewable energy generation systems could reduce the demand for oil, natural gas and liquid hydrocarbons. Recently, certain jurisdictions have implemented policies or incentives to decrease the use of fossil fuels and encourage the use of renewable fuel alternatives, which may lessen the demand for petroleum products and put downward pressure on commodity prices. Advancements in energy efficient products have a similar effect on the demand for oil and natural gas products. AOC cannot predict the impact of changing demand for oil and natural gas products, and any major changes may have a material adverse effect on AOC’s business, financial condition, results of operations and cash flow by decreasing AOC’s profitability, increasing its costs, limiting its access to capital and decreasing the value of its assets.

AOC’s workforce may be exposed to widespread pandemic

AOC’s operations are located in areas relatively remote from local towns and villages and represent a concentration of personnel working and residing in close proximity to one another. Should an employee or visitor become infected with a serious illness that has the potential to spread rapidly, this could place AOC’s workforce at risk. The 2020 outbreak of the novel coronavirus (COVID-19) in China and other countries around the world is one example of such an illness. AOC takes reasonable precautions to strictly follow industrial hygiene and occupational health guidelines. There can be no assurance that COVID-19 or another infectious illness will not impact AOC’s personnel and ultimately its operations.

Natural Disasters, Terrorist Attacks, Civil Unrest, Pandemics and other disruptions may adversely impact AOC

Upon the occurrence of a natural disaster, or upon an incident of war, riot or civil unrest, the impacted country, province, or region may not efficiently and quickly recover from such event, which could have a materially adverse effect on AOC, its customers, and/or either of their businesses or operations. Terrorist attacks, public health crises including epidemics, pandemics or outbreaks of new infectious disease or viruses (including, most recently, the novel coronavirus (COVID-19), civil unrest (including the most recent protests and railway blockades in Canada) and related events can result in volatility and disruption to local and global supply chains, operations, mobility of people and the financial markets, which could affect interest rates, credit ratings, credit risk, inflation, business, financial conditions, results of operations and other factors relevant to AOC, its customers, and/or either of their businesses or operations.

LEGAL PROCEEDINGS AND REGULATORY ACTIONS

To the knowledge of AOC, there are no outstanding legal proceedings material to AOC to which AOC is, or was a party to, or that any of its properties are or were the subject of, since the beginning of the most recently completed financial year, and no such proceedings are known to AOC to be contemplated.

To the knowledge of AOC, there were no: (i) penalties or sanctions imposed against AOC by a court relating to securities legislation or by a securities regulatory authority during the three years prior to the date hereof; (ii) penalties or sanctions imposed by a court or regulatory body against AOC that would likely be considered important to a reasonable investor in making an investment decision; or (iii) settlement agreements that AOC entered into with a court relating to securities legislation or with a securities regulatory authority during the three years prior to the date hereof.

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INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Other than as set forth in the accompanying Information Circular or as described below, the directors and executive officers of AOC are not aware of any material interest, direct or indirect, of any director, executive officer or AOC Shareholder holding a sufficient number of securities of AOC to affect materially the control of AOC, or any associate or affiliate of any such person, in any transaction within the last three years, or in any proposed transaction, that has materially affected or will materially affect AOC.

In connection with the Corval Arrangement, Annapolis, through its affiliated funds owned an aggregate of 28,571,428 common shares in the capital of Corval (“ Corval Shares ”) (representing 40.6% of the issued and outstanding Corval Shares at the time of the Corval Arrangement) and an aggregate of 20,000,000 AOC Shares (representing 35.8% of the issued and outstanding AOC Shares at the time of the Corval Arrangement). Upon completion of the Corval Arrangement, Annapolis, through its affiliated funds, owns 24,968,945 AOC Shares (or 34.2% of the issued and outstanding AOC Shares). Mr. Jody Forsyth, was a director of each of Corval and AOC at the time of the Corval Arrangement, and continues to act as a director of AOC presently. See “ Principal Securityholders ” in this Appendix D for additional information.

AUDITORS, TRANSFER AGENT AND REGISTRAR

The auditors of AOC are KPMG LLP, of Calgary, Alberta and the transfer agent of AOC is Computershare Trust Company of Canada in Calgary, Alberta.

MATERIAL CONTRACTS

The following agreements may be considered to be material contracts to AOC as of the date of this Information Circular:

Arrangement Agreement. See “ The Arrangement – The Arrangement Agreement ” in the body of this Information Circular.
Credit facility dated May 15, 2017 between AOC and National Bank of Canada as amended pursuant to a first amending agreement dated September 18, 2017, a second amending agreement December 22, 2017, a third amending agreement dated March 14, 2018, a fourth amending agreement dated May 22, 2019, a fifth amending agreement dated October 2, 2019, a sixth amending agreement dated June 26, 2020, a seventh amending agreement dated December 8, 2020 and an eighth amending agreement dated April 29, 2021 (collectively, the “ Credit Facility ”). The Credit Facility currently makes available a $50 million operating demand facility and provides that advances may be made by way of direct prime rate loans, bankers’ acceptances, letters of credit or letters of guarantee. The Credit Facility bears interest on a grid system depending on AOC’s debt to cash flow ratio ranging from less than or equal to 1:1, to greater than 3:1. The Credit Facility is secured by the Demand Debenture (as defined below).
Demand debenture dated May 15, 2017 as amended and restated effective May 22, 2019 (the “ Demand Debenture ”) granted by AOC to National Bank of Canada in the principal amount of $200,000,000 to secure the Credit Facility and granting a first priority security agreement over AOC’s assets.
AOC Option Plan. See “ Options to Purchase Securities – AOC Option Plan ” in this Appendix G.
Shareholder’s Agreement dated October 1, 2014 among AOC, certain of its shareholders and other parties. The Shareholder Agreement provides for certain agreements among the parties thereto relating to the rights and obligations among AOC and certain of its shareholders with respect to voting, share transfer restrictions, board observer rights, director election, pre-emptive rights and the issuance of AOC Performance Warrants, including the following key terms:
Director Election – The Shareholder Agreement provides that: (i) certain major investors holding 10% or more of the outstanding AOC Shares (“ Major Investors ”) have the right to nominate and have one (1) representative elected to the AOC Board; and (ii) Major Investors holding 20% or more of the outstanding AOC Shares have the right to nominate and have two (2) representatives elected to the AOC Board.
Observer Rights – Major Investors holding 20% or more of the outstanding AOC Shares also have the right to appoint one (1) individual to serve as a non-voting observer to the AOC Board.
Pre-Emptive Rights – In respect of future issuances of equity securities of AOC, subject to certain exceptions, certain shareholders of AOC are entitled to subscribe for such number of AOC Shares under such future issuances of equity securities as to maintain their pro rata ownership of AOC Shares prior to such financings.
AOC Performance Warrants – AOC may not grant more than an aggregate 11,000,000 AOC Performance Warrants.
Approval Rights – AOC may not approve or enter into any transaction that would be a “Liquidity Event”, including the Arrangement, without the approval of the AOC Board and the subsequent approval of each Major Investor.

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INTERESTS OF EXPERTS

There is no person or company whose profession or business gives authority to a statement made by such person or company and who is named as having prepared or certified a statement, report or valuation described or included in a filing, or referred to in a filing, made under National Instrument 51-102 – Ongoing Requirements for Issuers and Insiders by AOC during, or related to, AOC’s most recently completed financial year other than Sproule, AOC’s independent engineering evaluator and KPMG LLP, AOC’s auditors. None of the principals of Sproule had any registered or beneficial interests, direct or indirect, in any of AOC’s securities or other property or of AOC’s associates or affiliates either at the time they prepared the statement, report or valuation prepared by it, at any time thereafter or to be received by them. KPMG LLP, AOC’s auditors, are independent in accordance with the auditor’s rules of professional conduct in Alberta.

SIGNIFICANT ACQUISITIONS AND SIGNIFICANT DISPOSITIONS

AOC has not completed any significant acquisitions or significant dispositions or entered into any significant probable acquisitions within or since the completion of AOC’s most recently completed financial year other than the probable disposition of all of the AOC Shares in connection with the Arrangement described under the heading “ The Arrangement – The Arrangement Agreement ” in the body of this Information Circular.

REPORTING REQUIREMENTS

AOC is not a reporting issuer or the equivalent thereof under the securities legislation in any jurisdiction in Canada, the United States or elsewhere. Accordingly, AOC is not subject to the continuous reporting and disclosure requirements prescribed by such securities legislation. Therefore, there is no requirement that AOC comply with such requirements, including, without limitation, the requirements to provide prompt notification of material changes by way of press releases, to formally file disclosure documents with applicable securities regulatory authorities or to prepare and file quarterly unaudited financial statements.

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SCHEDULE A TO APPENDIX G

Audited Annual Financial Statements of AOC for the Years Ended December 31, 2020, 2019 and 2018

(see attached)

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FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2020

MANAGEMENT’S REPORT

Management is responsible for the preparation and presentation of the accompanying financial statements, including responsibility for significant accounting judgments and estimates in accordance with International Financial Reporting Standards. This responsibility includes selecting appropriate accounting principles and methods, and making decisions affecting the measurement of transactions in which objective judgment is required.

In discharging its responsibilities for the integrity and fairness of the financial statements, management designs and maintains the necessary accounting systems and related internal controls to provide reasonable assurance that transactions are authorized, assets are safeguarded and financial records are properly maintained to provide reliable information for the preparation of financial statements.

The Audit Committee is composed of Directors who are neither management nor employees of the Company. The Audit Committee is responsible for overseeing management in the performance of its financial reporting responsibilities, and for recommending approval of the financial information to the Board of Directors. The Audit Committee fulfils these responsibilities by reviewing the financial information prepared by management and discussing relevant matters with management and the independent auditors. The Audit Committee is also responsible for recommending the appointment of the Company’s external auditors.

KPMG LLP, an independent firm of Chartered Professional Accountants, was appointed by the shareholders of the Company to audit the financial statements and report directly to them. The independent auditors have full and free access to the Audit Committee and management of the Company to discuss their audit findings.

April 6, 2021

(Signed) “Andrew Greenslade”

(Signed) “Mark Lobello”

President and Chief Executive Officer

Vice President, Finance and Chief Financial Officer

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of Astra Oil Corp.

Opinion

We have audited the financial statements of Astra Oil Corp. (the “Company”), which comprise:

the statements of financial position as at December 31, 2020 and December 31, 2019
the statements of operations and comprehensive income for the years then ended
the statements of changes in shareholders’ equity for the years then ended
the statements of cash flows for the years then ended
and notes to the financial statements, including a summary of significant accounting policies

(Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2020 and December 31, 2019, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “ Auditors’ Responsibilities for the Audit of the Financial Statements ” section of our auditors’ report.

We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

(signed) “KPMG LLP”

Chartered Professional Accountants

Calgary, Canada

April 6, 2021

ASTRA OIL CORP. Statements of Financial Position

($ thousands)

Assets Current assets Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes receivable_(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment(note 5,7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax asset(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities Current liabilities Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank debt(note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease liability(note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes payable(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability(note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decommissioning provisions(note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease liability(note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liability(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholders’ equity Share capital(note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contributed surplus(note 12)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2020 7,692 371 1,419 9,482 6,600 155,574 1,616 173,272 8,022 16,397 242 — 1,666 26,327 18,355 627 — 45,309 78,027 13,155 36,781 127,963 173,272	December 31, 2019	December 31, 2019
			7,907 292 — 8,199 6,193 116,688 — 131,080 8,832 10,788 27 2,748 562 22,957 8,639 306 7,579 39,481 56,780 13,150 21,669 91,599 131,080

Commitments (note 18) Subsequent events (note 19)

See accompanying notes to the financial statements.

On behalf of the Board of Directors:

(Signed) “Ian Fergusson” Director

(Signed) “Jody Forsyth” Director

ASTRA OIL CORP. Statements of Operations and Comprehensive Income

($ thousands, except per share amounts)

Revenue Petroleum and natural gas sales_(note 16) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Realized gain on financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized loss on financial derivatives(note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transaction costs(note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation expense(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation(note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depletion and depreciation(note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on acquisition (_note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance expense Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accretion on decommissioning provisions_(note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxes Current income tax expense (recovery)(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income tax expense(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Carbon tax expense (recovery) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income and comprehensive income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income per share(note 11)_ Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Year Ended December 31, 2020 27,309 (4,595) 22,714 7,086 (1,104) 28,696 6,767 587 2,103 601 168 3 14,203 (11,695) 12,737 15,959 659 123 782 15,177 (1,430) 2,414 (919) 15,112 0.27 0.25	Year Ended December 31, 2019	Year Ended December 31, 2019
			62,036 (9,418) 52,618 4,698 (1,445) 55,871 8,049 1,152 1,772 — 280 4,869 21,909 — 38,031 17,840 622 159 781 17,059 2,745 2,442 956 10,916 0.20 0.18

See accompanying notes to the financial statements.

ASTRA OIL CORP.

Statements of Changes in Shareholders’ Equity

($ thousands)

Balance, January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issuance of common shares on corporate acquisition (note 5) . . . . . . . . . . . . . . Share-based compensation_(note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation(note 12)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Number of Shares 55,865 12,141 — — 68,006 55,865 — — 55,865	Share Capital 56,780 21,247 — — 78,027 56,780 — — 56,780	Contributed Surplus 13,150 — 5 — 13,155 5,550 7,600 — 13,150	Retained Earnings 21,669 — — 15,112 36,781 10,753 — 10,916 21,669	Total Shareholders’ Equity	Total Shareholders’ Equity
						91,599 21,247 5 15,112 127,963 73,083 7,600 10,916 91,599

See accompanying notes to the financial statements.

ASTRA OIL CORP. Statements of Cash Flows

($ thousands)

Operating Activities Income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to add (deduct) non-cash items: Depletion and depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation_(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized loss on financial derivatives(note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease interest expense(note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accretion on decommissioning provisions(note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax expense(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on acquisition(note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital(note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financing Activities Decrease in bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease payments(note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital(note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investing Activities Expenditures on exploration and evaluation(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation acquired(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenditures on property, plant and equipment(note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital(note 14)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Year Ended December 31, 2020 15,112 14,203 168 1,104 3 35 123 2,414 (11,695) (5,214) 16,253 (1,638) (79) 42 (1,675) (847) — (13,646) (85) (14,578) — — — 543	Year Ended December 31, 2019	Year Ended December 31, 2019
			10,916 21,909 280 1,445 4,869 22 159 2,442 — 162 42,204 (4,307) (77) — (4,384) (770) (500) (34,096) (2,454) (37,820) — — — 526

See accompanying notes to the financial statements.

ASTRA OIL CORP. Notes to the Financial Statements As at and for the years ended December 31, 2020 and 2019

1. REPORTING ENTITY

Astra Oil Corp. (“Astra” or the “Company”) is a private company that was incorporated as 1812581 Alberta Ltd. under the Business Corporations Act (Alberta) on April 1, 2014. On June 4, 2014, the Company amended its articles of incorporation to change its name to Astra Oil Corp. The Company is principally engaged in the acquisition, exploration, development and production of oil and natural gas reserves in western Canada and as such, is defined as having only one industry in one geographic segment. Astra’s principal place of business is located at Suite 1410, 205-5[th] Avenue SW, Calgary, Alberta, Canada, T2P 2V7.

2. BASIS OF PRESENTATION

Statement of Compliance

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. A summary of the significant accounting policies and method of computation is presented in note 3.

These financial statements were authorized for issue by the Board of Directors on April 6, 2021.

Basis of Measurement

These financial statements have been prepared on the historical cost basis except where noted within the accounting policies.

Operating expenses in the statement of operations and comprehensive income are presented as a combination of function and nature in conformity with industry practice. Share-based compensation and depreciation are presented on separate lines by their nature, while operating expenses and net general and administrative expenses are presented on a functional basis.

Functional and Presentation Currency

These financial statements are presented in Canadian dollars which is the Company’s functional currency.

Use of Estimates and Judgments

In March 2020, the World Health Organization declared a global pandemic due to the rapid outbreak of the coronavirus (“COVID-19”). Global responses to combat the spread of COVID-19 have resulted in a sudden decline in economic activity and resulted in a significant decrease in global crude oil demand. In addition, global crude oil supply increased significantly due to a geopolitically driven crude oil price war. Consequently, the effect of these events has resulted in an unprecedented decline in crude oil prices, creating an uncertain and volatile economic environment which adversely affects the Company’s operating results and financial position.

The full extent of the impact of COVID-19 on the Company’s operations and future financial performance is currently unknown. It will depend on future developments that are uncertain and unpredictable, including the duration and spread of COVID-19, its continued impact on financial markets on a macro-scale and any new information that may emerge concerning the effectiveness of available vaccines and the severity and spread of the virus. The pandemic presents uncertainty and risk with respect to the Company, its performance, and estimates and assumptions used by management in the preparation of its financial results. The Company’s financial performance, operations and business are particularly sensitive to a reduction in the demand for and prices of crude oil and natural gas. The potential direct and indirect impact of the economic downturn related to COVID-19 have been considered in management’s estimates and assumptions at period end and have been reflected in the Company’s results with any significant changes described in the relevant financial statements note.

The COVID-19 pandemic is an evolving situation that will continue to have widespread implications for the Company’s business environment, operations and financial condition. Management cannot reasonably estimate the length or severity of this pandemic, or the extent to which the disruption may materially impact the Company’s financial statements in fiscal 2021 and beyond.

Estimates and judgments made by management in the preparation of the financial statements are increasingly difficult and subject to a higher degree of measurement uncertainty during this volatile period. As a result, the Company has increased its monitoring of receivables due from oil

and natural gas marketers and from joint-asset partners to manage credit risk. The Company historically has not experienced any collection issues with oil and natural gas marketers as a significant portion of these receivables are with creditworthy purchasers. To protect against credit losses from joint-asset partners, the Company has the ability to withhold production in the event of non-payment and the ability to obtain the partners’ share of capital expenditures in advance of a project. The Company believes that its receivables at December 31, 2020 are substantially collectible.

Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are as follows:

Use of Estimates

The following are the key assumptions concerning the sources of estimation uncertainty at the end of the reporting period, which have a significant risk of causing adjustments to the carrying amounts of assets and liabilities.

Reserve Estimates

The Company’s reserves have been evaluated in accordance with the Canadian Oil and Gas Evaluation Handbook and comply with the standards that govern all aspects of reserves as prescribed in National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Under NI 51-101 standards, proved plus probable reserves are considered a “best estimate” of future recoverable reserves.

The estimation of petroleum and natural gas reserves is an inherently complex process. Proved and probable reserves are estimated based on geological data, geophysical data, engineering data, projected future rates of production, estimated commodity prices, costs, discount rates and the timing of future expenditures. Reserves estimates, although not reported as part of the Company’s financial statements, can have a significant effect on earnings, assets, as a result of their impact on depletion and impairment, decommissioning provisions, deferred income taxes and fair values in business combinations. Accordingly, the impact to the financial statements of changes to estimates of reserves in future periods could be material.

Business Combinations

In a business combination, management makes estimates of the fair value of assets acquired and liabilities assumed which includes assessing the value of oil and gas properties based upon the estimation of recoverable quantities of proven and probable reserves being acquired.

Decommissioning Provisions

The Company estimates future remediation costs of production facilities, wells and pipelines at different stages of development and construction of assets or facilities. In most instances, removal of assets occurs many years into the future. This requires assumptions regarding abandonment date, future environmental and regulatory legislation, the extent of reclamation activities, the engineering methodology for estimating cost, future removal technologies in determining the removal cost and liability-specific discount rates to determine the present value of these cash flows.

Derivatives

The Company’s estimate of the fair value of derivative financial instruments is dependent on estimate forward prices and volatility in those prices.

Income Taxes

The Company follows the asset/liability method for calculating deferred income taxes. Tax interpretations, regulations and legislation in the various jurisdictions in which the Company operates are subject to change. As such, income taxes are subject to measurement uncertainty. Deferred income tax assets are recognized only to the extent that those assets are considered recoverable. Deferred income tax assets are assessed by management at the end of the reporting period to determine the likelihood that they will be realized from future taxable earnings.

Share-Based Compensation

Share-based compensation expense recognized for the Company’s share-based compensation plan is accrued over the vesting period based on fair values. Fair values are determined on the grant date using the Black-Scholes option pricing model. In assessing the fair value of share-based compensation, significant assumptions such as expected volatility, expected term and estimated forfeiture rates are made.

Judgments

The following are the critical judgments that management has made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognized in the financial statements.

Cash Generating Unit (“CGU”)

For the purpose of impairment testing, petroleum and natural gas assets are aggregated into CGUs. The determination of CGUs requires judgment in defining the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or group of assets. CGUs are determined by similar geological structure, shared infrastructure, geographical proximity, commodity type, similar exposure to market risks and materiality.

Impairment

Judgments are required to assess when impairment indicators or reversal exist and impairment testing is required. The recoverable amounts of CGUs are based on the higher of their value-in-use and fair value less costs to sell. These calculations require the use of estimates and assumptions. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Value in use is generally computed by reference to the present value of the future cash flows expected to be derived from production of proved and probable reserves.

Exploration and Evaluation (“E&E”) Assets

The decision to transfer assets from E&E to property, plant and equipment requires management to make certain judgments as to future events and is based on whether economic quantities of proved plus probable reserves have been found to determine a project’s technical feasibility and commercial viability.

Income Taxes

Judgments are made by management at the end of the reporting period to determine the likelihood that deferred income tax assets will be realized from future taxable earnings. Assessing the recoverability of deferred income tax assets requires the Company to make judgments related to the expectations of future cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that assumptions regarding future profitability change, there can be an increase or decrease in the amounts recognized in earnings in the period in which the change occurs.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all years presented in these financial statements, except as disclosed herein.

Property, Plant and Equipment and Exploration and Evaluation Assets

Recognition and Measurement

Exploration and Evaluation Expenditures:

Pre-license costs are recognized in earnings as incurred.

E&E costs, including the costs of acquiring leases and licenses initially, and directly attributable costs are capitalized as exploration and evaluation assets. The costs are accumulated in cost centres by well, field or exploration area pending determination of technical feasibility and commercial viability.

E&E assets are assessed for impairment if, (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For purposes of impairment testing, exploration and evaluation assets are allocated to related CGUs.

The technical feasibility and commercial viability of extracting a mineral resource is considered to be determinable when proven and/or probable reserves are determined to exist. A review of each exploration license or field is carried out, at least annually, to ascertain whether proven and/or probable reserves have been discovered. Upon determination of proven and/or probable reserves, intangible exploration and evaluation assets attributable to those reserves are first tested for impairment and then reclassified from exploration and evaluation assets to a separate category within tangible assets referred to as oil and natural gas interests.

Development and Production Costs:

Items of property, plant and equipment, which include oil and gas development and production assets, are measured at cost less accumulated depletion and depreciation and accumulated impairment losses. Development and production assets are grouped into CGUs for impairment testing. When significant parts of an item of property, plant and equipment, including oil and natural gas interests, have different useful lives, they are accounted for as separate items (major components).

Gains and losses on disposal of property, plant and equipment, property swaps and farm-outs, are determined by comparing the proceeds or fair value of the asset received or given up with the carrying amount of property, plant and equipment and are recognized in earnings.

Subsequent Costs

Costs incurred subsequent to the determination of technical feasibility and commercial viability and the costs of replacing parts of property, plant and equipment are recognized as oil and natural gas interests only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in earnings as incurred. Such capitalized oil and natural gas interests generally represent costs incurred in developing proved and/or probable reserves and bringing on or enhancing production from such reserves and are accumulated on a field or geotechnical area basis. The carrying amount of any replaced or sold component is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in earnings as operating costs as incurred.

Depletion and Depreciation

The net carrying value of development or production assets is depleted using the unit of production method by reference to the ratio of production in the year to the related proven and probable reserves, taking into account estimated future development costs necessary to bring those reserves into production. Relative volumes of reserves and production are converted at the energy equivalent conversion ratio of six thousand cubic feet of natural gas to one barrel of oil. Future development costs are estimated taking into account the level of development required to produce the reserves.

Corporate assets are recorded in the statement of financial position at cost less accumulated depreciation. Depreciation is calculated on a diminishing balance method so as to write off the cost of these assets, less estimated residual values, over their estimated useful lives. Computer equipment is deprecia t ed at a rate of 30 percent while office furniture and equipment are depreciated at a rate of 20 percent.

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, term deposits held with banks and other short-term highly liquid investments with original maturities of three months or less.

Financial Instruments

Non-Derivative Financial Instruments

Non-derivative financial instruments are comprised of trade and other receivables, income taxes receivable, trade and other payables, income taxes payable and bank debt. Non-derivative financial instruments are recognized initially at fair value plus, for instruments not at fair value through earnings, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below.

Non-derivative financial instruments, such as trade and other receivable, trade and other payables, and bank debt, are measured at amortized cost using the effective interest method, less any impairment losses.

Derivative Financial Instruments

The Company may enter into certain financial derivative contracts in order to manage the exposure to market risks from fluctuations in commodity prices, interest rates and the exchange rate between Canadian and United States dollars. These instruments are not used for trading or speculative purposes. The Company does not designate its financial derivative contracts as effective accounting hedges, and thus has not applied hedge accounting, even though the Company considers all financial derivative contracts to be economic hedges. As a result, all financial derivative contracts are classified at fair value through earnings and are recorded on the statement of financial position at fair value. Transaction costs are recognized in earnings when incurred.

Share Capital

Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares, stock options, and performance warrants are recognized as a deduction from equity, net of any tax effects when appropriate.

Impairment

Financial Assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired by measuring the asset’s expected credit loss (“ECL”). Accounts receivable are due within one year or less; therefore, these financial assets are not considered to have a significant financing component and a lifetime ECL is measured at the date of initial recognition of the accounts receivable.

The ECL pertaining to accounts receivable is assessed at initial recognition and this provision is re-assessed at each reporting date. ECL’s are a probability-weighted estimate of all possible default events related to the financial asset (over the lifetime or within 12 months after the reporting period, as applicable) and are measured as the difference between the present value of the cash flows due to Astra and the cash flows the Company expects to receive. In making an assessment as to whether financial assets are credit-impaired, the Company considers historically realized bad debts, evidence of a debtor’s present financial condition and whether a debtor has breached certain contracts, the probability that a debtor will enter bankruptcy or other financial reorganization, changes in economic conditions that correlate to increased levels of default, the number of days a debtor is past due in making a contractual payment, and the term to maturity of the specified receivable. The carrying amounts of financial assets are reduced by the amount of the ECL through an allowance account and losses are recognized in the statements of income.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognized in the statements of income. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized.

Non-Financial Assets

The carrying amounts of the Company’s non-financial assets, other than E&E assets and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, an impairment test is completed each year. E&E assets are assessed for impairment when they are reclassified to property, plant and equipment, and also if facts and circumstances suggest that the carrying amount exceeds the recoverable amount.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets or CGUs. The recoverable amount of an asset or a CGU is the greater of its value in use and its fair value less costs to sell.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Value in use is generally computed by reference to the present value of the future cash flows expected to be derived from production of proven and probable reserves.

The goodwill acquired in an acquisition, for the purpose of impairment testing, is allocated to the CGUs that are expected to benefit from the synergies of the combination. E&E assets are allocated to related CGUs when they are assessed for impairment, both at the time of any triggering facts and circumstances as well as upon their eventual reclassification to property, plant and equipment.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in earnings. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.

An impairment loss in respect of property, plant and equipment and exploration and evaluation assets, recognized in prior years, is assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depletion and depreciation or amortization, if no impairment loss had been recognized. An impairment loss in respect of goodwill is not reversed.

Leased Assets

At inception of a contract, the Company assesses whether a contract is, or contains a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Company recognizes a right-of-use asset and a lease obligation at the lease commencement date. The right-of-use asset is initially measured based on the initial amount of the lease obligation adjusted for any lease payments made at or before the commencement date. The assets are depreciated over the lease term using the straight-line method as this most closely reflects the expected pattern of consumption of future economic benefits.

The lease obligation is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Lease components are included in the present value calculation of lease payments, with non-lease components expensed as incurred. Variable lease payments that do not depend on an index or rate are not included in the measurement of the lease obligation. The lease obligation is subsequently measured at amortized cost using the effective interest rate method.

Share-Based Compensation

Long term incentives are granted to officers, directors, employees and consultants in accordance with the Company’s stock option and performance warrant plans.

The grant date fair value of stock options and performance warrants are recognized as compensation expense, with a corresponding increase in contributed surplus over the vesting period. The Company uses the Black-Scholes option pricing model to determine the fair value of stock options and performance warrants granted. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of longterm incentives that are forfeited. Upon the exercise of the long-term incentives, consideration paid, together with the amount previously recognized in contributed surplus, is recorded as an increase in share capital. In the event that vested long term incentives expire, previously recognized compensation expense associated with such long-term incentives is not reversed. In the event that the long-term incentives are forfeited, previously recognized compensation expense associated with the unvested portion of such long term incentives is reversed.

Revenue Recognition

Revenue from the sale of crude oil, natural gas and natural gas liquids is recognized when control of the product is transferred to the buyer based on the consideration specified in the contracts with customers. This usually occurs when the product is physically transferred at the delivery point agreed upon in the contract and legal title to the product passes to the customer.

The Company evaluates its arrangements with third parties and partners to determine if the Company acts as the principal or as an agent. In making this evaluation, the Company considers if it obtains control of the product delivered or services provided, which is indicated by the Company having the primary responsibility for the delivery of the product or rendering of the service, having the ability to establish prices or having inventory risk. If the Company acts in the capacity of an agent rather than as a principal in a transaction, then the revenue is recognized on a net-basis, only reflecting the fee, if any, realized by the Company from the transaction.

Tariffs, tolls and other fees charged to other entities for use of pipelines and facilities owned by the Company are evaluated by management to determine if these originate from contracts with customers or from incidental or collaborative arrangements. Fees charged to other entities that are from contracts with customers are recognized in revenue when the related services are provided.

Royalty income is recognized as it accrues in accordance with the terms of the overriding royalty agreements.

Transportation

Costs paid by Astra for the transportation of crude oil, natural gas and natural gas liquids from the wellhead to the point of title transfer are recognized when the transportation is provided.

Income Tax

Income tax expense comprises current and deferred tax. Income tax expense is recognized in earnings except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is not a business combination. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Per Share Amounts

Basic per share information is calculated using the weighted average number of common shares outstanding during the period. Diluted per share amounts are calculated using the treasury stock method. The dilutive impact of stock options and performance warrants incorporates the weighted average number of common shares that would be issued upon the conversion of vested and dilutive stock options and performance warrants based on the fair market value of common shares at the end of the period. As the Company’s shares do not trade on a public market exchange, the market price is determined by management’s best estimate of the fair market value at the period end date. The treasury method

assumes that proceeds from the exercise of all potentially dilutive instruments are used to repurchase common shares at the average estimated market price during the year. Anti-dilutive options and performance warrants are not included in the calculation.

Business Combinations

The purchase method of accounting is used to account for acquisitions of businesses and assets that meet the definition of a business under IFRS. The cost of an acquisition is measured as the fair value of the assets given up, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their acquisition date fair values. If the consideration of acquisition given up is less than the fair value of the net assets received, the difference is recognized immediately in the income statement. If the consideration of acquisition is greater than the fair value of the net assets received, the difference is recognized as goodwill on the statement of financial position. Acquisition costs incurred are expensed.

There is an option to apply a concentration test that permits a simplified assessment of whether an acquired set of activities and assets is in fact a business. The optional concentration test is met if substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. An entity may make such an election separately for each transaction or other event. If the concentration test is met, the set of activities and assets is determined not to be a business and no further assessment is needed.

Change in Accounting Policies

IFRS 3

Astra adopted amendments to IFRS 3 Business Combinations effective January 1, 2020, which will be applied prospectively to acquisitions that occur on or after January 1, 2020. These amendments did not result in changes to the Company’s accounting policies for applying the acquisition method but could result in future acquisitions being accounted for as an asset acquisition as opposed to a business combination should the criteria of the optional asset concentration test within these amendments be met. There was no impact to the Company’s financial statements.

Government Grants

Government grants are recognized when there is reasonable assurance that the grant will be received, and all attached conditions will be met. If a grant is received but compliance with any attached condition is not achieved, the grant is recognized as a deferred liability until such conditions are fulfilled. When the grant relates to an income or expense item, it is recognized as income or a reduction of the related expense item in the period in which the income is earned or costs are incurred. Where the grant relates to an asset, it is recognized as a reduction to the net book value of the related asset and then subsequently in the statements of income over the expected useful life of the related asset through lower charges to impairment or depletion and depreciation. For the year end period ended December 31, 2020, the Company has received $0.4 million in government grants with $0.4 million netted against G&A expenses ($nil – December 31, 2019).

4. DETERMINATION OF FAIR VALUES

A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Measurement

Astra classifies the fair value of these transactions according to the following hierarchy based on the amount of observable inputs used to value the instrument.

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1. Prices are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace.

Level 3 – Valuations in this level are those with inputs for the asset or liability that are not based on observable market data.

Property, Plant and Equipment and Exploration and Evaluation Assets (“Property, Plant and Equipment”)

The fair value of property, plant and equipment recognized in an acquisition is based on market values. The market value of Property, Plant and Equipment is the estimated amount for which Property, Plant and Equipment could be exchanged on the acquisition date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of oil and natural gas interests (included in Property, Plant and Equipment) and exploration and evaluation assets is estimated with reference to the discounted cash flows expected to be derived from oil and natural gas production based on externally prepared reserve reports. The risk-adjusted discount rate is specific to the asset with reference to general market conditions.

The fair value of other items of Property, Plant and Equipment is based on the quoted market prices for similar items.

Trade and Other Receivables, Deposits, Income Tax Receivable and Trade and Other Payables, Income Tax Payable and Bank Debt

The fair value of trade and other receivables, deposits, trade and other payables, and bank debt is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. The fair value of these balances approximated their carrying value due to their short term to maturity. The fair value of bank debt and bank overdrafts approximated their carrying value as they bear a floating rate of interest and the margin charged by the lenders are indicative of current credit spreads.

Derivatives

The fair value of financial derivatives consisting of forward contracts and swaps is determined by discounting the difference between the contracted prices and published forward price curves as at the statement of financial position date, using the remaining contracted volumes and a credit adjusted interest rate and are fair valued using Level 2 information.

Stock Options and Performance Warrants

The fair value of stock options and performance warrants are measured using a Black-Scholes pricing model. Measurement inputs include share price on measurement date (calculated using management’s best estimate of fair market value), exercise price of the instrument, expected volatility, weighted average expected life of the instruments (based on historical experience and general option holder behavior) and the riskfree interest rate (based on government bonds).

5. CORPORATE ACQUISITION

On December 8, 2020, Astra acquired all of the issued and outstanding shares of Corval Energy Ltd. (“Corval”). As consideration, Astra issued 12,140,931 common shares at a fair value of $1.75 per common share for total share consideration of $21.2 million. The acquisition of Corval provides the Company with increased production and developed lands primarily in Manitoba. Total transaction costs incurred by the Company of $0.6 million associated with the acquisition were expensed on the statement of operations and comprehensive income. The acquisition resulted in a gain of $11.7 million as a result of the Company recognizing a deferred tax asset as part of the acquisition of $11.6 million.

Results from the operations of Corval are included in the Company’s financial statements from the closing date of the transaction. The estimated acquisition date fair value attributed to property, plant and equipment was derived from the estimate of proved and probable oil and gas reserves and the related cash flows prepared at December 31, 2020 by independent third-party reserve evaluators. The estimated proved and probable oil and gas reserves and the related cash flows were discounted at a rate based on what a market participant would have paid as well as market metrics in the prevailing area at that time.

The acquisition has been accounted for using the purchase method based on estimated fair values as follows using discount rates based on what a market participant would have paid:

($ thousands) Issuance of shares_(note 11)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of net assets acquired: Working capital deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Amount
	21,247 21,247 (416) (7,248) 34,883 (5,710) (176) 11,609 (11,695) 21,247

($ thousands)
Issuance of shares_(note 11)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of net assets acquired:
Working capital deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

21,247
21,247
(416)
(7,248)
34,883
(5,710)
(176)
11,609
(11,695)
21,247

The fair value of decommissioning provisions were initially estimated using a credit adjusted rate of 6 percent.

The statement of operations and comprehensive income include the results of operations for the period following the close of the transaction on December 8, 2020. For the year ended December 31, 2020, the statement of operations and comprehensive income includes $1.1 million of petroleum and natural gas revenue and $0.9 million of net income and comprehensive income generated from the acquired assets since the acquisition on December 8, 2020.

If the Company had acquired Corval on January 1, 2020, the pro-forma results of the oil and gas sales and net income and comprehensive income for the year ended December 31, 2020 would have been as follows:

($ thousands) Petroleum and natural gas sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income and comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As Stated 27,309 15,112	Corval 12,081 4,512	Pro Forma Year ended December 31, 2020
			39,390 19,624

6. EXPLORATION AND EVALUATION ASSETS

($ thousands) Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation expense . . . . . . . . . . . . . . . . . . . . . . . . . Transfers to property, plant and equipment_(note 7)_ . . . . . . . . . . . . Balance, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As at December 31, 2020 6,193 — 847 (168) (272) 6,600	As at December 31, 2019	As at December 31, 2019
			7,754 500 770 (280) (2,551) 6,193

E&E assets consist of Astra’s exploration projects for which the determination of proved or probable reserves is pending. Additions represent Astra’s share of costs incurred on E&E assets during the period as well as acquisitions for the period related to undeveloped land acquired. The cost of undeveloped land that expires during a period is recognized in earnings.

Impairment Assessment

In accordance with IFRS, an impairment test is performed if the Company identifies an indicator of impairment. At December 31, 2020 and 2019, the Company determined that no indicators of impairment existed on its E&E assets; therefore, impairment tests were not performed.

7. PROPERTY, PLANT AND EQUIPMENT

($ thousands) Cost: Balance, January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized general and administrative costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized share-based compensation_(note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer from exploration and evaluation assets(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Right of use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized general and administrative costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized share-based compensation(note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer from exploration and evaluation assets(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Right of use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in decommissioning provisions(note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate acquisition(note 5)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depletion and depreciation: Balance, January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depletion and depreciation for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depletion and depreciation for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net carrying value: Balance, December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Petroleum and Natural Gas Assets 127,709 33,638 434 2,731 2,551 388 690 168,141 12,489 1,026 2 272 — 3,883 34,883 220,695 29,634 21,891 51,525 14,063 65,588 116,616 155,107	Office Equipment 133 24 — — — — — 157 131 — — — 404 — — 692 67 18 85 140 225 72 467	Total
			127,842 33,662 434 2,731 2,551 388 690
			168,298 12,620 1,026 2 272 404 3,883 34,883
			221,387
			29,701 21,909
			51,610 14,203
			65,813
			116,688 155,574

Future Development Costs and Salvage Value

At December 31, 2020, future development costs of $145.4 million (December 31, 2019 - $137.8 million) associated with proved plus probable undeveloped reserves are included in costs subject to depletion. An estimated $9.9 million (December 31, 2019 - $7.1 million) of salvage value on production equipment is excluded from the costs subject to depletion.

Impairment Assessment

In accordance with IFRS, an impairment test is performed on a CGU if the Company identifies indicators of impairment.

At March 31, 2020, due to a sudden and significant decline in forecasted commodity benchmark prices due to the combination of the global oil price war and the potential long-term impact of the COVID-19 pandemic, the Company tested for impairment.

The recoverable value of the Company’s CGU was estimated as the value in use based on the net present value of before tax cash flows of proved plus probable reserves. Proved and probable reserves are estimated by the Company’s third-party reserve evaluator and internally updated as at March 31, 2020 (using the Company’s December 31, 2019 reserve report prepared by its independent reserve engineer) to reflect current commodity price decks, operating costs, future development costs and other parameters that can impact reserve volumes. The values are then discounted between 8% and 20% depending on the reserve’s composition. The recoverable amount is sensitive to commodity price, discount rate, production volumes, royalty rates, operating costs and future capital expenditures. In determining the appropriate discount rate, the Company considered various characteristics and risks of the assets. The reserve process is inherently subjective and involves considerable estimate uncertainty.

It was determined as at March 31, 2020, the carrying value of the Company’s CGU exceeded the recoverable amount which resulted in the Company recording an impairment of $12.3 million.

In determining the future cash flows, the Company utilized the following average benchmark pricing forecasts from three independent reserve evaluators:

Year 2020(1) . . . . . . . . . . . . . . . . 2021. . . . . . . . . . . . . . . . . . 2022. . . . . . . . . . . . . . . . . . 2023. . . . . . . . . . . . . . . . . . 2024. . . . . . . . . . . . . . . . . . 2025. . . . . . . . . . . . . . . . . . 2026. . . . . . . . . . . . . . . . . . 2027. . . . . . . . . . . . . . . . . . 2028. . . . . . . . . . . . . . . . . . 2029. . . . . . . . . . . . . . . . . . 2030. . . . . . . . . . . . . . . . . .	Cromer LSB 35 API ($CAD/bbl) 30.52 45.45 57.29 62.81 66.17 67.50 68.90 70.32 71.76 73.24 74.71	Western Canada Select 20.5 API ($CAD/bbl) 20.51 34.65 46.34 51.25 54.28 55.72 56.96 58.22 59.51 60.82 62.04	WTI Cushing Oklahoma ($US/bbl) 30.57 40.45 49.17 53.28 55.66 56.87 58.01 59.17 60.35 61.56 62.79	Alberta AECO-C Spot ($CAD/MMBtu) 1.75 2.20 2.38 2.45 2.53 2.60 2.66 2.72 2.79 2.85 2.92	Edmonton Pentanes Plus ($CAD/bbl) 36.51 50.72 62.80 68.49 71.73 73.16 74.66 76.19 77.75 79.34 80.96	Edmonton Butane ($CAD/bbl) 19.50 29.70 37.87 41.80 44.14 45.02 45.95 46.89 47.86 48.84 49.81	Edmonton Propane ($CAD/bbl) 11.01 17.08 23.55 26.03 27.57 28.19 28.83 29.49 30.17 30.85 31.54	Exchange Rate ($US/$CAD)
								0.71 0.73 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75

(1) Effective April 1, 2020

Impairment losses can be reversed in future periods if the estimated recoverable amount of the CGU exceeds its carrying value. The impairment recovery is limited to a maximum of the estimated depleted historical cost if the impairment had not been recognized.

At December 31, 2020, due to strengthening commodity prices compared to March 31, 2020, as well as increases to proved plus probable reserves the Company completed an assessment of the indicators of reversal of impairment.

For the purpose of the impairment testing, the recoverable amount of the Company’s CGU is the greater of its value in use and its fair value less costs to sell. Value in use is generally the before-tax future cash flows expected to be derived from production of proven and probable reserves estimated by the Company’s third-party reserve evaluators. At December 31, 2020, the Company used value in use, with discount rates used in the valuation ranging from 8% to 20% depending on the underlying composition of reserve categories and risk profile.

It was determined that the recoverable amount of the Company’s CGU at December 31, 2020, exceeded the carrying value and an impairment reversal of $12.3 million was recorded. In addition, $0.4 million in depletion expense was recorded on the impairment reversal to account for depletion had the impairment not been recognized as of March 31, 2020.

In determining the future cash flows, the Company utilized the following average benchmark pricing forecasts from three independent reserve evaluators:

Year 2021. . . . . . . . . . . . . . . . . . 2022. . . . . . . . . . . . . . . . . . 2023. . . . . . . . . . . . . . . . . . 2024. . . . . . . . . . . . . . . . . . 2025. . . . . . . . . . . . . . . . . . 2026. . . . . . . . . . . . . . . . . . 2027. . . . . . . . . . . . . . . . . . 2028. . . . . . . . . . . . . . . . . . 2029. . . . . . . . . . . . . . . . . . 2030. . . . . . . . . . . . . . . . . . 2031. . . . . . . . . . . . . . . . . .	Cromer LSB 35 API ($CAD/bbl) 54.74 58.41 62.91 65.67 67.07 68.49 69.93 71.42 72.92 74.38 75.87	Western Canada Select 20.5 API ($CAD/bbl) 44.63 48.18 52.10 54.10 55.19 56.29 57.42 58.57 59.74 60.93 62.15	WTI Cushing Oklahoma ($US/bbl) 47.17 50.17 53.17 54.97 56.07 57.19 58.34 59.50 60.69 61.91 63.15	Alberta AECO-C Spot ($CAD/MMBtu) 2.78 2.70 2.61 2.65 2.70 2.76 2.81 2.87 2.92 2.98 3.04	Edmonton Pentanes Plus ($CAD/bbl) 59.24 63.19 67.34 69.77 71.18 72.61 74.07 75.56 77.08 78.62 80.20	Edmonton Butane ($CAD/bbl) 26.36 32.85 39.20 40.65 41.50 42.36 43.24 44.14 45.06 45.96 46.88	Edmonton Propane ($CAD/bbl) 18.18 21.91 24.57 25.47 26.00 26.54 27.09 27.65 28.23 28.79 29.37	Exchange Rate ($US/$CAD)
								0.77 0.77 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76 0.76

(1) Effective December 31, 2020

As at December 31, 2019, the Company determined indicators of impairment existed; therefore, impairment tests were performed. It was determined that the recoverable amount of the Company’s CGU exceeded the carrying value and an impairment charge was not recorded.

8. LEASES

Property plant and equipment -right-of-use assets ($ thousands) Balance, January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Amount
	388 (65) 323 404 (102) 625

Property plant and equipment -right-of-use assets
($ thousands)
Balance, January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

388
(65)
323
404
(102)
625

Lease liabilities ($ thousands) Balance, January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquired liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Amount
	388 22 (77) 333 404 176 35 (79) 869

Lease liabilities
($ thousands)
Balance, January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

388
22
(77)
333
404
176
35
(79)
869

The Company discounted lease payments using its incremental borrowing rate at February 12, 2020 of 5% to calculate the lease liability.

The Company has the following future commitments associated with its lease obligations:

Less than 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Years 2-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Years 4-5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . After Year 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total future lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total future interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Present value of the lease payments. . . . . . . . . . . . . . . . . . . . . . . . . Current portion of lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current portion of lease obligations . . . . . . . . . . . . . . . . . . . . . . .	Office lease 239 193 197 — 629 (58) 571 (217) (354)	Surface lease 40 76 48 256 420 (122) 298 (25) (273)	As at December 31, 2020	As at December 31, 2020
				279 269 245 256 1,049 (180) 869 (242) (627)

For the year ended December 31, 2020, interest expense of $0.04 million and total cash outflow of $0.1 million were recognized relating to lease obligations.

9. BANK FACILITY

As at December 31, 2020, the Company had available a $40.0 million revolving operating demand credit facility (“Credit Facility”) with a Canadian chartered bank. The Credit Facility provides that advances may be made by way of direct prime rate loans, bankers’ acceptances, letters of credit or letters of guarantee. The Credit Facility bears interest on a grid system depending on the Company’s debt to cash flow ratio ranging from less than or equal to 1:1, to greater than 3:1. The Credit Facility is secured by a $200 million debenture and a general security agreement over all the petroleum and natural gas assets of the Company.

The Company’s bank indebtedness does not have a specific maturity date as it is a demand facility. This means that the lender has the ability to demand repayment of all outstanding indebtedness or a portion thereof at any time. If that were to occur, the Company would be required to find alternative sources of capital or sell assets to repay the indebtedness. The Company reduces the risk by complying with the covenants of the credit facility agreement.

The amount of the Credit Facility is subject to a borrowing base redetermination test performed at least annually, primarily based on reserves, using commodity prices estimated by the lender, as well as other factors. The Company is subject to an adjusted working capital covenant ratio of not less than 1:1 at all times under the Credit Facility. The lender defines the working capital ratio as the ratio of (i) current assets plus any undrawn availability under the Credit Facility but excluding the impact of any financial derivative assets, to (ii) current liabilities excluding any amount drawn under the Credit Facility and excluding any financial derivative liabilities. As at December 31, 2020, the Company was in compliance with all covenants outlined in the credit agreement. There can be no assurance that the amount of the available Credit Facility will not be adjusted at the next scheduled borrowing base review, which is scheduled for April 30, 2021.

10. DECOMMISSIONING PROVISIONS

The Company’s decommissioning provisions result from its ownership interest in all its wells and facilities. The total decommissioning provision is estimated based on the Company’s net ownership interest in all of its wells and facilities, estimated costs to reclaim and abandon these wells and facilities and the estimated timing of the costs to be incurred in future years. The Company has estimated the net present value of the decommissioning provisions based on an undiscounted total future provision of $20.9 million (December 31, 2019 - $10.9 million). These payments are expected to be incurred over the next 9 to 25 years. At December 31, 2020, a risk-free rate of 1.21 percent (December 31, 2019 – 1.76 percent) and an inflation rate of 1.49 percent (December 31, 2019 – 1.35 percent) were used to calculate the net present value of the decommissioning provisions.

The following table reconciles the decommissioning provisions:

($ thousands) Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions_(note 5)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in estimates(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As at December 31, 2020 8,639 5,710 348 123 3,535 18,355	As at December 31, 2019	As at December 31, 2019
			7,790 — 1,110 159 (420) 8,639

(1) This amount relates to the revaluation of decommissioning provisions using the period end risk-free rate as well as the revaluation of decommissioning provisions acquired using the risk-free discount rate. At the date of acquisitions, the decommissioning provisions were recorded at fair value.

11. SHARE CAPITAL

Authorized

Authorized capital consists of an unlimited number of common shares (“Common Shares”), an unlimited number of preferred shares and an unlimited number of series 1 special voting shares (“Special Voting Shares”).

Issued and Outstanding (thousands) Balance, December 31, 2019 and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issued pursuant to corporate acquisition_(note 5)_ . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Number of shares 55,865 12,141 68,006	Amount ($)	Amount ($)
			56,780 21,247 78,027

Income Per Share

Basic and diluted income per share is calculated as follows:

($ thousands, except per share amounts) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average Common Shares – basic . . . . . . . . . . . . . . . . . . . Weighted average Common Shares – diluted . . . . . . . . . . . . . . . . . . Income per Common Share – basic . . . . . . . . . . . . . . . . . . . . . . . . Income per Common Share – diluted . . . . . . . . . . . . . . . . . . . . . .	December 31, 2020 15,112 56,661 59,333 0.27 0.25	December 31, 2019	December 31, 2019
			10,916 55,865 60,353 0.20 0.18

The calculation of the diluted income per share for the year ended December 31, 2020 and December 31, 2019 includes the effect of all stock options (“Options”) and performance warrants (“Warrants”) that are in the money as they were dilutive. As at December 31, 2020, 5.5 million Options and 4.4 million Warrants were in the money (December 31, 2019, 5.5 million and 6.6 million, respectively).

12. SHARE-BASED COMPENSATION

The Company accounts for its share-based compensation plan using the fair value method. Under this method, compensation is expensed over the vesting period for Warrants and Options, with a corresponding increase to contributed surplus.

a) Performance Warrants

The Company is authorized to issue up to 11 million Warrants to purchase Common Shares to directors, officers, employees and consultants to purchase Common Shares, each with an initial term of five years from the date of closing (or such earlier term as may be determined in accordance with the Warrant certificates). The expiry date of the Warrants can be amended to a later date at the discretion of the Board. If the expiry date is extended beyond the fifth anniversary of Closing, the exercise price for each series shall increase by 8% on the fifth anniversary of Closing and by a further 8% (compounded annually) on each subsequent annual anniversary of Closing. On September 25, 2019, the Company’s outstanding Warrants were amended to extend the expiry date from October 1, 2019 to October 1, 2022, with no change in exercise price.

Warrants first vest subject to funded capital (“Dollar Vesting”), such that the up to 11 million Warrants that may be granted in connection with the Tier 1 Financing vest at a rate of 0.1% for every $55 thousand in cash invested in Common Shares under the Tier 1 Financing. Secondly, Warrants are exercisable for Common Shares of the Company if a liquidity event occurs. A liquidity event includes the sale of all or substantially all of the Common Shares of the Company or assets for consideration that includes cash or marketable securities, the liquidation, dissolution or winding-up of the Company, or any listing of the Company on a recognized exchange. Warrants, subject to the terms of the Warrant certificates, are not exercisable unless they are dollar vested and a liquidity event has occurred. Warrants are issued in five equal tranches with various minimum exercise price thresholds.

At December 31, 2020, Astra had 11 million Warrants issued and outstanding. As at December 31, 2020, all of the total outstanding Warrants had Dollar Vested.

A summary of the Warrants outstanding is as follows:

(thousands) Balance, December 31, 2019 and December 31, 2020. . . . . . . . . . . . . . .	Performance Warrants
	11,000

A summary of the number of Warrants that vest upon achieving various price thresholds and at various exercise prices is as follows:

Number of Performance Warrants

Number of Performance Warrants

(thousands, except per share amounts)
2,200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exercise Price

$1.50
$1.75
$2.00
$2.25
$2.50

b) Stock Options

The Company is authorized to issue Options to purchase Common Shares to directors, officers, employees and consultants of the Company. The number of Common Shares reserved for issuance upon the exercise of the Options is limited to 10% of the number of Common Shares to be issued under the Tier 1 Financing, which is 5.5 million Options. The Options have an initial term of five years from the date of closing, however the expiry date can be amended to a later date by the discretion of the Board. If the expiry date is extended beyond the fifth anniversary of Closing, the exercise price shall increase by 8% on the fifth anniversary of Closing and by a further 8% (compounded annually) on each subsequent annual anniversary of Closing. On September 25, 2019, the Company’s outstanding Options were amended to extend the expiry date from October 1, 2019 to October 1, 2022, with no change in exercise price.

The Options have an exercise price equal to the greater of the fair market value of the Common Shares at the time of grant and $1.00 per Common Share. Options first vest subject to funded capital (“Dollar Vesting”), such that the up to 5.5 million Options that may be granted in connection with the Tier 1 Financing vest at a rate of 0.1% for every $55 thousand in cash invested in Common Shares under the Tier 1 Financing. Secondly, Options eligible to vest under Dollar Vesting vest as to one-third on each of the first three anniversaries of their date of grant (“Time Vesting”), subject to immediate Time Vesting upon the occurrence of a Liquidity Event. Options will only be considered to be vested if they have both Dollar Vested and Time Vested.

At December 31, 2020, Astra had 5.5 million Options issued and outstanding. As at December 31, 2020, all of the total outstanding Options had Dollar Vested and Time Vested.

Options Outstanding

($ thousands, except per share amounts) Balance, January 1, 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2019 and December 31, 2020 . . . . . . . . . . . . . . . . . . .	Weighted average exerciseprice $1.00 $1.00	Stock options
		5,500 5,500

On September 25, 2019, the Company’s outstanding Warrants and Options were amended to extend the expiry date from October 1, 2019 to October 1, 2022, with no change in exercise price (the “Extension”). The Company recorded a non-cash stock-based compensation expense of approximately $4.8 million (net of capitalization of $2.7 million) relating to the Extension for the year ended December 31, 2019. This amount represents the fair value of the Extension determined by the difference between the fair value of the outstanding Warrants and Options with the expiration date of October 1, 2022 (the “Extended Term”) and the fair value of the outstanding Warrants and Options with the expiration date of October 1, 2019 (the “Original Term”). The fair value in each case was estimated as at September 25, 2019 using the Black Scholes optionpricing model that takes into account: exercise price, expected life, current price, expected volatility, and risk-free rates. The assumptions used in calculating the fair value of the Extended Term and Original Term Warrants and Options at September 25, 2019 are set forth below:

Weighted average risk-free rate (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average expected life (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected volatility (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected forfeiture rate (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Extended Term 1.46 3.01 54 5	Original Term
		1.53 0.02 54 5

The following summarizes the Company’s total share-based compensation related to the Warrants and Options:

($ thousands) Total share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized share-based compensation . . . . . . . . . . . . . . . . . . . . . . . Total share-based compensation expense . . . . . . . . . . . . . . . . . . .	December 31, 2020 5 (2) 3	December 31, 2019	December 31, 2019
			7,600 (2,731) 4,869

13. INCOME TAXES

The actual income tax provision differs from the expected amount calculated by applying the Canadian combined federal and provincial corporate tax rates to income before income tax. These differences result from the following:

($ thousands) Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Combined federal and provincial income tax rate . . . . . . . . . . . . . . . Expected income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) resulting from: Non-deductible items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on acquisition_(note 5)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . Rate adjustments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2020 16,096 25.50% 4,104 75 1 (2,982) (214) 984	December 31, 2019	December 31, 2019
			16,103 26.78% 4,312 92 1,304 — (521) 5,187

In the second quarter of 2020, as part of its economic recovery plan, Alberta announced the accelerated reduction of its general corporate income tax rate to 8% (from 10%) effective July 1, 2020. Previously, the general corporate income tax rate was not scheduled to decrease to 8% until 2022. The impact of the corporate tax rate decrease on the tax expense for the year ended December 31, 2020 was not significant.

The following table provides a continuity of the deferred income tax asset (liability):

($ thousands) Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share issue costs and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-capital losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SR&ED Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ($ thousands) Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share issue costs and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Jan. 1, 2020 (9,906) 2,177 8 142 — — — (7,579) Jan. 1, 2019 (7,007) 2,103 5 (238) (5,137)	Recognized in equity — — — — — — — — Recognized in equity — — — — —	Recognized on acquisition 525 1,427 — — 7,577 1,176 904 11,609 Recognized on acquisition — — — — —	Recognized in earnings (3,729) 992 (2) 275 50 — — (2,414) Recognized in earnings (2,899) 74 3 380 (2,442)	Dec. 31, 2020	Dec. 31, 2020
					(13,110) 4,596 6 417 7,627 1,176 904 1,616 Dec. 31, 2019
						(9,906) 2,177 8 142 (7,579)

The Company had approximately $140.1 million of deductions (December 31, 2019 - $79.0 million) and $1.2 million of income tax credits (December 31, 2019 - $nil) available for income tax purposes at December 31, 2020. At December 31, 2020, the Company had deferred income tax assets in excess of its deferred income tax liability.

14. SUPPLEMENTAL CASH FLOW INFORMATION

($ thousands) Source (use) of cash: Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax payable and receivable . . . . . . . . . . . . . . . . . . . . . . Working capital deficit acquired through acquisition . . . . . . . . Change in non-cash working capital . . . . . . . . . . . . . . . . . . . . . . . Related to operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Related to financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Related to investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2020 215 (79) (810) (4,167) (416) (5,257) (5,214) 42 (85) (5,257)	December 31, 2019	December 31, 2019
			(2,354) (39) (2,107) 2,208 — (2,292) 162 — (2,454) (2,292)

15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company’s activities expose it to a variety of financial risks that arise as a result of its exploration, development, production and financing activities. Astra has exposure to credit, liquidity and market risk.

Astra’s risk management policies are established to identify and analyze the risks faced by the Company, set appropriate limits and controls and to monitor risks and adherence to market conditions and the Company’s activities.

This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risk and the Company’s management of capital. Further quantitative disclosures are included in these financial statements.

Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from partners within jointly owned assets and operations, oil and natural gas marketers and counterparties to derivative financial assets.

Substantially all of the Company’s petroleum and natural gas assets are marketed under standard industry terms. Receivables from petroleum and natural gas marketers are normally collected on the 25th day of the month following production. As a result, Astra collects sales revenues in an organized manner. Management monitors purchaser credit positions to mitigate any potential credit losses. Receivables from partners with jointly owned assets and operations are typically collected within one to three months of the bill being issued to a partner. The Company attempts to mitigate the risk from these receivables by obtaining partner approval of significant capital expenditures prior to the expenditure. However, the receivables are from participants in the petroleum and natural gas sector, and collection of the outstanding balances can be impacted by industry factors such as commodity price fluctuations, limited capital availability and unsuccessful drilling programs. The Company does not typically obtain collateral from petroleum and natural gas marketers or joint asset partners; however, the Company can cash call for major projects and does have the ability, in some cases, to withhold production from joint asset partners in the event of non-payment.

Derivative financial assets can consist of commodity and foreign exchange contracts used to manage the Company’s exposure to fluctuations in commodity prices and the exchange rate between United States and Canadian dollars. The Company manages the credit risk exposure related to derivative financial assets by selecting investment grade counterparties and by not entering into contracts for trading or speculative purposes.

Financial instruments that potentially subject Astra to concentrations of credit risk consist primarily of trade and other receivables. The Company minimizes credit risk associated with possible non-performance to these financial instruments by entering into contracts with financially sound counterparties. The Company believes these risks are minimal.

The Company assesses quarterly if there has been any impairment of the financial assets of the Company. For the year ended December 31, 2020, the Company expects to collect all financial assets.

The maximum exposure to credit risk is represented by the carrying amount of trade and other receivables, and income tax receivables. As at December 31, 2020, the Company’s receivables consisted of $5.8 million of receivables from petroleum and natural gas marketers ($5.1 million – December 31, 2019), $1.7 million of receivables from partners in jointly owned assets ($2.7 million – December 31, 2019) and $0.2 million of receivables from realized hedging gains ($0.1 million – December 31, 2019). As at December 31, 2020, there are no material financial assets that the Company considers past due. The Company monitors the age of its receivables, investigating the issue behind past due amounts and reviewing the creditworthiness and collection history of the counterparty. As the operator of the properties, the Company does have the ability in most instances to withhold production from partners who are in default of amounts owing.

Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting financial obligations as they become due. The

Company’s approach to managing liquidity is to ensure, under a reasonable range of outcomes, that it will have sufficient liquidity to meet its liabilities when due. The Company’s financial liabilities consist of trade and other payables, bank debt, financial derivative liabilities and income taxes payable.

The Company ensures that is has sufficient debt available to meet expected operational and capital expenses for a reasonable period. To achieve this objective, the Company prepares annual operational and capital expenditure budgets and associated liquidity forecasts, which are regularly monitored and updated as considered necessary. Further, the Company utilizes authorizations for expenditures to further manage capital expenditures. The Company also mitigates liquidity risk by maintaining an insurance program to manage exposure to insurable losses.

Astra anticipates it will continue to have adequate liquidity to fund its financial liabilities through its available debt financing, future issuances of common shares and cash flow from operations. At December 31, 2020, the Company had net debt (defined as bank debt plus working capital, excluding the fair value of financial derivatives and lease liabilities) of $14.9 million (December 31, 2019 - $14.2 million) and a $40 million credit facility, leaving the Company with $25.1 million of undrawn facility.

Market Risk

Market risk is the risk that changes in market prices such as foreign exchange rates, commodity prices and interest rates will affect the Company’s net earnings or the value of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing returns.

Foreign Currency Exchange Risk

Foreign currency exchange risk is the risk that future cash flows will fluctuate as a result of changes in foreign exchange rates. All of the Company’s petroleum and natural gas sales are denominated in Canadian dollars. Due to the fact that the demand for petroleum and natural gas is substantially driven by the demand in the U.S., the Company’s exposure to U.S. dollar foreign exchange risk is indirectly driven by the price of petroleum and natural gas.

Interest Rate Risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in interest rates. The Company is exposed to interest rate fluctuations on its bank debt which bears a floating rate of interest. Based on average bank debt and cash and cash equivalents outstanding during the year, interest rate risk is not material to the Company’s financial results.

Commodity Price Risk

Commodity price risk is the risk that future cash flows will fluctuate as a result of changes in commodity prices. Commodity prices for petroleum and natural gas are impacted by not only the relationship between the Canadian and United States dollar, but also North American and global economic events that dictate the levels of supply and demand. The Company has attempted to mitigate a portion of the commodity price risk through the use of various financial derivative contracts as outlined below.

The following table presents a reconciliation of the change in the unrealized amounts for the periods ended December 31, 2020 and December 31, 2019:

(thousands) Financial derivative asset as at January 1, 2019 Unrealized loss on financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability as at December 31, 2019 Unrealized loss on financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability as at December 31, 2020	Fair Value	Fair Value
		883 (1,445) (562) (1,104) (1,666)

As at December 31, 2020, the Company had the following crude oil commodity price contracts in place:

Remaining Period Jan. 1, 2021 – Mar. 31, 2021 . . . . . . . . . . . . . . . . . . . . . . Jan. 1, 2021 – Dec. 31, 2021 . . . . . . . . . . . . . . . . . . . . . . Apr. 1, 2021 – Dec. 31, 2021 . . . . . . . . . . . . . . . . . . . . . Jan. 1, 2021 – Dec. 31, 2021 . . . . . . . . . . . . . . . . . . . . . . Jan. 1, 2021 – Dec. 31, 2021 . . . . . . . . . . . . . . . . . . . . . . Jan. 1, 2021 – Mar. 31, 2021 . . . . . . . . . . . . . . . . . . . . . .	Commodity Crude Oil Crude Oil Crude Oil Crude Oil Crude Oil Crude Oil	Contract Quantity Swap 500 bbl/d Swap 400 bbl/d Swap 500 bbl/d Swap 200 bbl/d MSW Differential Swap 1,100 bbl/d Swap 500 bbl/d	Contract Price(1) CAD $58.09/bbl(1) CAD $58.60/bbl(1) CAD $58.70/bbl(1) CAD $56.45/bbl(1) USD($6.00)/bbl CAD $58.30/bbl(1)	Fair Value At December 31, 2020
				CAD($169) CAD($400) CAD($340) CAD($356) CAD($241) CAD($160)

(1) NYMEX WTI monthly average converted to Canadian dollars.

Capital Management

The Company’s objective for managing capital is to maintain a strong statement of financial position and capital base to provide financial flexibility which will allow it to execute on its capital expenditure program. The Company evaluates its ability to carry on business as a going concern on a quarterly basis. The Company considers its capital structure to include share capital, bank debt and net debt. Astra manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust capital spending, issue new shares or issue new debt.

The current challenging economic climate may lead to further adverse changes in cash flows, working capital levels and/or debt balances, which may also have a direct impact on the Company’s operating results and financial position.

These and other factors may adversely affect the Company’s liquidity and the Company’s ability to generate income and cash flows in the future. At December 31, 2020, the Company remains in compliance with the financial covenants contained in the bank facility and based on current available information, management expects to comply with financial covenants during the subsequent 12-month period. However, in light of the current volatility in commodity prices and uncertainty regarding the timing for full recovery in such prices, pipeline and transportation capacity constraints, and the effect of COVID-19, the preparation of financial forecasts is challenging.

The key measure that the Company utilizes in evaluating its capital structure is net debt to annualized adjusted fund flow (which is defined as cash flows from operating activities before changes in non-cash working capital, transaction costs and decommissioning expenditures incurred) from the most recent quarter. Net debt to annualized adjusted funds flow represents a measure of the time it is expected to take to pay off the debt if no further capital expenditures were incurred and if adjusted funds flow in the next year were equal to the amount in the most recent quarter annualized. Astra monitors this ratio and uses this as a key measure in making decisions regarding financing and capital spending.

The Company monitors this ratio and endeavors to maintain it at, or below 1.5 to 1.0 in a normalized commodity price environment. This ratio may increase at certain times as a result of acquisitions or low commodity prices. As shown below, as at December 31, 2020, the Company’s ratio of net debt to annualized cash flow was 0.5 to 1.0 (December 31, 2019 – 0.4 to 1.0).

($ thousands) Current assets_(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: current liabilities(1) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted funds flow from current quarter’s operating activities(3)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annualized adjusted funds flow from operating activities . . . . . Net debt to annualized adjusted funds flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2020 9,482 (8,022) (16,397) (14,937) 7,163 28,652 0.5	December 31, 2019	December 31, 2019
			8,199 (11,580) (10,788) (14,169) 8,978 35,912 0.4

(1) Excludes financial derivative asset and financial derivative liability .

(2) Excludes current lease liability.

(3) Cash flow from operating activities adjusted for change in non-cash working capital and transaction costs.

The Company is not subject to any externally imposed restrictions on capital.

16. REVENUE

The Company sells its production pursuant to variable-price contracts. The transaction price for variable priced contracts is based on the commodity price, adjusted for quality, location or other factors, whereby each component of the pricing formula can be either fixed or variable, depending on the contract terms. Commodity prices are based on market indices that are determined on a monthly or daily basis. The contracts generally have a term of one year or less, whereby delivery takes place through the contract period. Revenues are typically collected on the 25[th] day of the month following production.

The table details the Company’s petroleum and natural gas sales by product:

($ thousands) Light crude oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Natural gas liquids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Petroleum and natural gas sales . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2020 27,250 18 41 27,309	December 31, 2019	December 31, 2019
			61,960 35 41 62,036

17. KEY MANAGEMENT PERSONNEL

Astra has determined that the Company’s key management personnel consist of its officers and directors. In addition to the salaries paid to the officers, the Company’s directors and officers participate in the Company’s stock option plan as well as the performance warrant plan.

Key management personnel compensation comprised:

($ thousands) Short-term employee benefits(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term Share-based payments(2) . . . . . . . . . . . . . . . . . . . . . . . . . Total compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2020 1,522 3 1,525	December 31, 2019	December 31, 2019
			1,806 7,008 8,814

(1) Includes salaries, annual bonuses and other short-term compensation paid in the respective year on a cash paid basis.

(2) Represents the amortization of share-based compensation associated with the capitalized and non-capitalized portion of Options and Warrants recorded in the financial statements during the respective periods.

18. COMMITMENTS

Office Lease

The Company has a lease for office premises that expires in 2025. In addition, the company has acquired a lease for office premises that expires in January, 2022. Future minimum lease payments, including operating cost estimates, are as follows:

($ thousands) Less than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Between one and five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As at December 31, 2020	As at December 31, 2020
		490 962 1,452

19. SUBSEQUENT EVENTS

Risk Management

Subsequent to December 31, 2020, the Company had entered into the following crude oil commodity price contracts:

Remaining Period Apr. 1, 2021 – Jun. 30, 2021 . . . . . . . . . . . . . . . . . . . . . Jul. 1, 2021 – Dec. 31, 2021 . . . . . . . . . . . . . . . . . . . . . Jan. 1, 2022 – Jun. 30, 2022 . . . . . . . . . . . . . . . . . . . . . . Jul. 1, 2022 – Dec. 31, 2022 . . . . . . . . . . . . . . . . . . . . . Mar. 1, 2021 – Dec. 31, 2021 . . . . . . . . . . . . . . . . . . . . Jan. 1, 2022 – Dec. 31, 2022 . . . . . . . . . . . . . . . . . . . . .	Commodity Crude Oil Crude Oil Crude Oil Crude Oil Crude Oil Crude Oil	Contract Quantity Swap 500 bbl/d Swap 500 bbl/d Swap 500 bbl/d Swap 500 bbl/d MSW Differential Swap 1,100 bbl/d Swap 500 bbl/d	Contract Price(1) CAD $62.50/bbl(1) CAD $64.33/bbl(1) CAD $66.82/bbl(1) CAD $66.22/bbl(1) CAD($7.63)/bbl CAD $72.53/bbl(1)

(1) NYMEX WTI monthly average converted to Canadian dollars.

Government Loan

On March 17, 2021, the Company has entered into a five-year, interest free term loan agreement with the Federal Government of Canada via the Emissions Reduction Fund (“ERF”) administered by the Department of Natural Resources. The ERF will provide Astra with up to $9.1 million for the Company’s planned Gas Emission Reduction Program which will see the Company build infrastructure to eliminate greenhouse gas emissions in specific operating areas. Loan payments will begin on March 31 2025, when 10% of the repayable portion will be repaid, followed by 33.3% of the loan payable on March 31, 2026 and the remaining 56.7% of the loan payable on March 31, 2027.

Gas Handling Agreement

In relation to Astra’s Gas Emission Reduction Program discussed above, on March 23, 2021, Astra entered into a gas handling agreement with a peer oil and gas production company (“Operator”) over a five-year term. The agreement has a minimum volume commitment which will charge Astra a minimum of $6.4 million of processing fees over the total five-year term for gas stream volumes produced by Astra and processed by the Operator through its facility. Management forecasts the processing fees to be offset by economic revenue associated with the sales gas volumes.

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FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2019

MANAGEMENT’S REPORT

April 9, 2020

(Signed) “Andrew Greenslade”

President and Chief Executive Officer

(Signed) “Mark Lobello” Vice President, Finance and Chief Financial Officer

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of Astra Oil Corp.

Opinion

We have audited the financial statements of Astra Oil Corp. (the “Company”), which comprise:

the statements of financial position as at December 31, 2019 and December 31, 2018
the statements of operations and comprehensive income for the years then ended
the statements of changes in shareholders’ equity for the years then ended
the statements of cash flows for the years then ended
and notes to the financial statements, including a summary of significant accounting policies

(Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2019 and December 31, 2018, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”).

Basis for Opinion

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Information

Management is responsible for the other information. Other information comprises:

the information included in Management’s Discussion and Analysis.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

We obtained the information included in Management’s Discussion and Analysis as at the date of this auditors’ report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditors’ report.

We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

(signed) “KPMG LLP”

Chartered Professional Accountants

Calgary, Canada

April 9, 2020

ASTRA OIL CORP. Statements of Financial Position

($ thousands)

Assets Current assets Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative asset_(note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment(note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities Current liabilities Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank debt(note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease liability(note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes payable(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability(note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decommissioning provisions(note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease liability(note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liability(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholders’ equity Share capital(note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contributed surplus(note 12)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2019 7,907 292 — 8,199 6,193 116,688 131,080 8,832 10,788 27 2,748 562 22,957 8,639 306 7,579 39,481 56,780 13,150 21,669 91,599 131,080	December 31, 2018	December 31, 2018
			5,553 253 883 6,689 7,754 98,141 112,584 10,939 15,095 — 540 — 26,574 7,790 — 5,137 39,501 56,780 5,550 10,753 73,083 112,584

Commitments (note 18) Subsequent events (note 19)

See accompanying notes to the financial statements.

On behalf of the Board of Directors:

(Signed) “Ian Fergusson” Director

(Signed) “Jody Forsyth” Director

ASTRA OIL CORP. Statements of Operations and Comprehensive Income

($ thousands, except per share amounts)

Revenue Petroleum and natural gas sales_(note 16) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Realized gain (loss) on financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain (loss) on financial derivatives(note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net revenue Expenses Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transaction costs(note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation expense(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation(note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depletion and depreciation(note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Carbon tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from operating activities Finance expense Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accretion on decommissioning provisions(note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before taxes Taxes Current income tax expense(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income tax expense(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income and comprehensive income for the year Income per share(note 11)_ Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Year Ended December 31, 2019 62,036 (9,418) 52,618 4,698 (1,445) 55,871 8,049 1,152 1,772 — 280 4,869 21,909 956 38,987 16,884 622 159 781 16,103 2,745 2,442 10,916 0.20 0.18	Year Ended December 31, 2018	Year Ended December 31, 2018
			59,505 (7,090) 52,415 (3,227) 2,114 51,302 7,819 978 2,894 34 1,496 648 18,474 — 32,343 18,959 754 153 907 18,052 540 4,559 12,953 0.25 0.22

See accompanying notes to the financial statements.

ASTRA OIL CORP. Statements of Changes in Shareholders’ Equity

($ thousands)

Balance, January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation_(note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, January 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issue of common shares(note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share issue costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation(note 12)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Number of Shares 55,865 — — 55,865 47,165 8,700 — — — 55,865	Share Capital 56,780 — — 56,780 46,883 9,900 (3) — — 56,780	Contributed Surplus 5,550 7,600 — 13,150 4,549 — — 1,001 — 5,550	Retained Earnings (Deficit) 10,753 — 10,916 21,669 (2,200) — — — 12,953 10,753	Total Shareholders’ Equity	Total Shareholders’ Equity
						73,083 7,600 10,916 91,599 49,232 9,900 (3) 1,001 12,953 73,083

See accompanying notes to the financial statements.

ASTRA OIL CORP. Statements of Cash Flows

($ thousands)

Operating Activities Income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to add (deduct) non-cash items: Depletion and depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation_(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized loss (gain) on financial derivatives(note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease interest expense(note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accretion on decommissioning provisions(note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax expense(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital(note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows from operating activities Financing Activities Proceeds from issue of common shares(note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share issue costs(note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease payments(note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows from (used in) financing activities Investing Activities Expenditures on exploration and evaluation(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation acquired(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenditures on property, plant and equipment(note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenditures on property acquisitions(note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital(note 14)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows used in investing activities Change in cash and cash equivalents Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents, end of year Interest Paid	Year Ended December 31, 2019 10,916 21,909 280 1,445 4,869 22 159 2,442 162 42,204 — — (4,307) (77) (4,384) (770) (500) (34,096) — (2,454) (37,820) — — — 526	Year Ended December 31, 2018	Year Ended December 31, 2018
			12,953 18,474 1,496 (2,114) 648 — 153 4,559 2,957 39,126 8,100 (4) 140 (5) 8,231 (1,053) (2,224) (41,462) (2,111) (507) (47,357) — — — 641

See accompanying notes to the financial statements.

ASTRA OIL CORP. Notes to the Financial Statements As at and for the years ended December 31, 2019 and 2018

1. REPORTING ENTITY

2. BASIS OF PRESENTATION

Statement of Compliance

These financial statements were authorized for issue by the Board of Directors on April 9, 2020.

Basis of Measurement

These financial statements have been prepared on the historical cost basis except where noted within the accounting policies.

Functional and Presentation Currency

These financial statements are presented in Canadian dollars which is the Company’s functional currency.

Use of Estimates and Judgments

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future years affected. Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are as follows:

Use of Estimates

Reserve Estimates

Business Combinations

Decommissioning Provisions

Derivatives

The Company’s estimate of the fair value of derivative financial instruments is dependent on estimate forward prices and volatility in those prices.

Income Taxes

Share-Based Compensation

Judgments

Cash Generating Unit (“CGU”)

Impairment

Judgments are required to assess when impairment indicators exist and impairment testing is required. The recoverable amounts of CGUs are based on the higher of their value-in-use and fair value less costs to sell. These calculations require the use of estimates and assumptions. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Value in use is generally computed by reference to the present value of the future cash flows expected to be derived from production of proved and probable reserves. Management does not expect a significant difference between value in use and fair value less cost to sell.

Exploration and Evaluation (“E&E”) Assets

Income Taxes

related to the expectations of future cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that assumptions regarding future profitability change, there can be an increase or decrease in the amounts recognized in earnings in the period in which the change occurs.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all years presented in these financial statements, except as disclosed herein.

Property, Plant and Equipment and Exploration and Evaluation Assets

Recognition and Measurement

Exploration and Evaluation Expenditures:

Pre-license costs are recognized in earnings as incurred.

Development and Production Costs:

Subsequent Costs

Depletion and Depreciation

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, term deposits held with banks and other short-term highly liquid investments with original maturities of three months or less.

Financial Instruments

Non-Derivative Financial Instruments

Non-derivative financial instruments are comprised of trade and other receivables, trade and other payables, and bank debt. Non-derivative financial instruments are recognized initially at fair value plus, for instruments not at fair value through earnings, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below.

Derivative Financial Instruments

Share Capital

Impairment

Financial Assets

Non-Financial Assets

Leased Assets

Share-Based Compensation

Long term incentives are granted to officers, directors, employees and consultants in accordance with the Company’s stock option and performance warrant plans.

The grant date fair value of stock options and performance warrants are recognized as compensation expense, with a corresponding increase in contributed surplus over the vesting period. The Company uses the Black-Scholes option pricing model to determine the fair value of stock options and performance warrants granted. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of long term incentives that are forfeited. Upon the exercise of the long term incentives, consideration paid, together with the amount previously recognized in contributed surplus, is recorded as an increase in share capital. In the event that vested long term incentives expire, previously recognized compensation expense associated with such long term incentives is not reversed. In the event that the long term incentives are forfeited, previously recognized compensation expense associated with the unvested portion of such long term incentives is reversed.

Flow-Through Shares

Periodically, the Company finances a portion of its exploration and development activities through the issuance of flow-through shares. The resource expenditure deductions for income tax purposes related to exploratory and development activities are renounced to investors in accordance with tax legislation. Flow-through shares issued are recorded in share capital at the fair value of common shares on the date of issue. The premium received on issuing flow-through shares is initially recorded as a liability. As qualifying expenditures are incurred, the premium is reversed, and a deferred income tax liability is recorded. The net amount is then recognized as deferred income tax expense.

Revenue Recognition

Royalty income is recognized as it accrues in accordance with the terms of the overriding royalty agreements.

Transportation

Costs paid by Astra for the transportation of crude oil, natural gas and natural gas liquids from the wellhead to the point of title transfer are recognized when the transportation is provided.

Income Tax

Per Share Amounts

Change in Accounting Policies

IFRS 16

On January 1, 2019, the Company adopted IFRS 16 Leases, which will replace IAS 17 Leases and IFRIC 4 Determining Whether an Arrangement Contains a Lease. IFRS 16 introduces a single lease accounting model for leases which requires a right-of-use asset and lease obligation to be recognized on the statements of financial position for contracts that are, or contain, a lease. The Company used the modified retrospective adoption approach to adopt the new standard. The modified retrospective approach does not require restatement of prior period financial information as it applies the standard prospectively.

On initial adoption, the Company has elected to record right-of-use assets based on the corresponding lease obligation. Right-of use assets and lease obligations of $0.5 million were recorded as of January 1, 2019, with no impact on retained earnings. When measuring the present value of lease obligations, the Company discounted remaining lease payments using its incremental borrowing rate at January 1, 2019, which was determined to be a rate of 5.0% . The recognition of the present value of the lease obligations, which were previously classified as operating leases, resulted in increases to assets, liabilities, depletion and depreciation and finance costs and decreases to operating and general and administrative costs.

The right-of-use assets and lease obligations recognized relate to the Company’s office lease and certain surface access rights. The Company has elected to apply practical expedients to not recognize right-of-use assets and lease obligations for short term leases that have a lease term of 12 months or less, and leases of low-value assets.

Future Accounting Pronouncements

IFRS 3

In October 2018, the IASB issued amendments to IFRS 3 Business Combinations, that seek to clarify whether a transaction results in an asset or a business acquisition. The amendments apply to businesses acquired in annual reporting periods beginning on or after January 1, 2020. Earlier application is permitted. The amendments include an election to use a concentration test. This is a simplified assessment that results in an asset acquisition of substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. If the concentration test is not applied, or the test is failed, then the assessment focuses on the existence of a substantive process. The Company has not early adopted the amendment.

4. DETERMINATION OF FAIR VALUES

Measurement

Astra classifies the fair value of these transactions according to the following hierarchy based on the amount of observable inputs used to value the instrument.

Level 3 – Valuations in this level are those with inputs for the asset or liability that are not based on observable market data.

Property, Plant and Equipment and Exploration and Evaluation Assets (“Property, Plant and Equipment”)

The fair value of other items of Property, Plant and Equipment is based on the quoted market prices for similar items.

Trade and Other Receivables, Deposits and Trade and Other Payables, and Bank Debt

Derivatives

Stock Options and Performance Warrants

5. PROPERTY ACQUISITIONS

On January 31, 2018, Astra acquired certain interests in petroleum and natural gas properties and undeveloped land located in southeast Saskatchewan for cash consideration of approximately $1.4 million. In connection with the transaction, the Company incurred associated decommissioning liabilities of $0.9 million. Transaction costs were recorded to earnings.

The transaction has been accounted for using the purchase method of accounting whereby the net assets acquired and the liabilities assumed are recorded at fair value. The following table summarizes the net assets acquired pursuant to the acquisition:

($ thousands) Cash consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Amount	Amount
		1,443 1,443 2,310 (867) 1,443

The fair value of decommissioning provisions were initially estimated using a credit adjusted rate of 8 percent.

On February 26, 2018, Astra acquired certain interests in petroleum and natural gas properties and undeveloped land located in southeast Saskatchewan for total consideration of approximately $4.5 million, consisting of $2.7 million of cash consideration and the issuance of 600,000 common shares at $3.00 per share. In connection with the transaction, the Company incurred associated decommissioning liabilities of $0.1 million. Transaction costs were recorded to earnings.

($ thousands) Cash consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issuance of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Amount	Amount
		2,732 1,800 4,532 1,847 2,779 (94) 4,532

The fair value of decommissioning provisions were initially estimated using a credit adjusted rate of 8 percent.

6. EXPLORATION AND EVALUATION ASSETS

($ thousands) Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation expense . . . . . . . . . . . . . . . . . . . . . . . . . Transfers to property, plant and equipment_(note 7)_ . . . . . . . . . . . . Balance, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As at December 31, 2019 7,754 500 770 (280) (2,551) 6,193	As At December 31, 2018	As At December 31, 2018
			8,149 2,939 1,053 (1,496) (2,891) 7,754

E&E assets consist of Astra’s exploration projects for which the determination of proved or probable reserves is pending. Additions represent Astra’s share of costs incurred on E&E assets during the period. Acquisitions for the period related to undeveloped land acquired from an oil and gas producer. The cost of undeveloped land that expires during a period is recognized in earnings.

On December 19, 2018, Astra acquired land in southeast Saskatchewan for total cash consideration of $0.16 million.

On October 21, 2019, Astra acquired land in southeast Saskatchewan for total cash consideration of $0.5 million.

Impairment Assessment

In accordance with IFRS, an impairment test is performed if the Company identifies an indicator of impairment. At December 31, 2019 and 2018, the Company determined that no indicators of impairment existed on its E&E assets; therefore, impairment tests were not performed.

7. PROPERTY, PLANT AND EQUIPMENT

($ thousands) Cost: Balance, January 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions_(note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized general and administrative costs . . . . . . . . . . . . . . . . . . . Capitalized share-based compensation(note 12) . . . . . . . . . . . . . . . Transfer from exploration and evaluation assets(note 6) . . . . . . . . . Change in decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized general and administrative costs . . . . . . . . . . . . . . . . . . . Capitalized share-based compensation(note 12) . . . . . . . . . . . . . . . Transfer from exploration and evaluation assets(note 6)_ . . . . . . . . . Right of use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depletion and depreciation: Balance, January 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depletion and depreciation for the year . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depletion and depreciation for the year . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net carrying value: Balance, December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Petroleum and Natural Gas Assets 76,142 4,157 40,595 850 353 2,891 2,721 127,709 33,638 434 2,731 2,551 388 690 168,141 11,176 18,458 29,634 21,891 51,525 98,075 116,616	Office Equipment 116 — 17 — — — — 133 24 — — — — — 157 51 16 67 18 85 66 72	Total
			76,258 4,157 40,612 850 353 2,891 2,721
			127,842 33,662 434 2,731 2,551 388 690
			168,298
			11,227 18,474
			29,701 21,909
			51,610
			98,141 116,688

Future Development Costs and Salvage Value

At December 31, 2019, future development costs of $137.8 million (December 31, 2018 - $130.6 million) associated with proved plus probable undeveloped reserves are included in costs subject to depletion. An estimated $7.1 million (December 31, 2019 -$4.6 million) of salvage value on production equipment is excluded from the costs subject to depletion.

Impairment Assessment

In accordance with IFRS, an impairment test is performed on a CGU if the Company identifies indicators of impairment. At December 31, 2019, due to the weakness and volatility in the Canadian commodity price environment, the Company tested for impairment.

For the purpose of the impairment testing, the recoverable amount of the Company’s CGU is the greater of its value in use and its fair value less costs to sell. Value in use is generally the before-tax future cash flows expected to be derived from production of proven and probable reserves estimated by the Company’s third-party reserve evaluators. At December 31, 2019, the Company used value in use, with discount rates used in the valuation ranging from 10% to 20% depending on the underlying composition of reserve categories and risk profile. It was determined that the recoverable amount of the Company’s CGU exceeded the carrying value and an impairment charge was not recorded.

In determining the future cash flows, the Company utilized the following benchmark pricing forecasts from its independent reserves evaluator:

Year 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030	Cromer LSB 35 API ($CAD/bbl) 73.84 77.51 77.73 79.30 80.91 82.54 84.21 85.92 87.66 89.43 91.24	Western Canada Select 20.5 API ($CAD/bbl) 59.81 63.98 63.77 65.04 66.34 67.67 69.02 70.40 71.81 73.25 74.71	Alberta AECO-C Spot ($CAD/MMBtu) 2.04 2.27 2.81 2.89 2.98 3.06 3.15 3.24 3.33 3.42 3.51	Edmonton Pentanes Plus ($CAD/bbl) 76.32 80.52 80.00 81.68 83.38 85.13 86.90 88.72 90.57 92.45 94.38	Edmonton Butane ($CAD/bbl) 37.72 43.90 47.74 48.69 49.67 50.66 51.67 52.71 53.76 54.84 55.93	Edmonton Propane ($CAD/ bbl) 25.07 31.84 32.43 33.26 34.12 34.99 35.88 36.78 37.71 38.65 39.61	Exchange Rate ($US/$CAD)
							0.76 0.77 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80

As at December 31, 2018, the Company determined that no indicators of impairment existed; therefore, impairment tests were not performed.

8. LEASES

Upon transition to IFRS 16, the Company recognized additional right-of-use and lease liabilities. The right of use asset is disclosed within property plant and equipment. The impact of the transition and activity in the period is summarized below.

Property plant and equipment -right-of-use assets
($ thousands)
Balance, January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liabilities
($ thousands)
Balance, January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

388
(65)
323
Amount

388
22
(77)
333

The Company discounted lease payments using its incremental borrowing rate at January 1, 2019 of 5.00% to calculate the lease liability.

The Company has the following future commitments associated with its lease obligations:

Less than 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . After 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total future lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total future interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Present value of the lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . Current portion of lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current portion of lease obligations . . . . . . . . . . . . . . . . . . . . . . .	Office lease 5 — — — 5 — 5 (5) —	Surface lease 40 81 61 287 469 (141) 328 (21) 306	As at December 31, 2019
			45 81 61 287 474 (141) 333 (27) 306

For the year ended December 31, 2019, interest expense of $nil million and total cash outflow of $0.1 million were recognized relating to lease obligations.

9. BANK FACILITY

As at December 31, 2019, the Company had available a $50.0 million revolving operating demand credit facility (“Credit Facility”) with a Canadian chartered bank. The Credit Facility provides that advances may be made by way of direct prime rate loans, bankers’ acceptances, letters of credit or letters of guarantee. The Credit Facility bears interest on a grid system depending on the Company’s debt to cash flow ratio ranging from less than or equal to 1:1, to greater than 3:1. The Credit Facility is secured by a $200 million debenture and a general security agreement over all the petroleum and natural gas assets of the Company.

The amount of the Credit Facility is subject to a borrowing base redetermination test performed at least annually, primarily based on reserves, using commodity prices estimated by the lender, as well as other factors. The Company is subject to an adjusted working capital covenant ratio of not less than 1:1 at all times under the Credit Facility. The lender defines the working capital ratio as the ratio of (i) current assets plus any undrawn availability under the Credit Facility but excluding the impact of any financial derivative assets, to (ii) current liabilities excluding any amount drawn under the Credit Facility and excluding any financial derivative liabilities. As at December 31, 2019, the Company was in compliance with all covenants outlined in the credit agreement. There can be no assurance that the amount of the available Credit Facility will not be adjusted at the next scheduled borrowing base review, which is scheduled for April 30, 2020.

10. DECOMMISSIONING PROVISIONS

The Company’s decommissioning provisions result from its ownership interest in all its wells and facilities. The total decommissioning provision is estimated based on the Company’s net ownership interest in all of its wells and facilities, estimated costs to reclaim and abandon these wells and facilities and the estimated timing of the costs to be incurred in future years. The Company has estimated the net present value of the decommissioning provisions based on an undiscounted total future provision of $10.9 million (December 31, 2018 - $10.6 million). These payments are expected to be incurred over the next 9 to 25 years. At December 31, 2019, a risk-free rate of 1.76 percent (December 31, 2018 – 2.18 percent) and an inflation rate of 1.35 percent (December 31, 2018 – 2 percent) were used to calculate the net present value of the decommissioning provisions.

The following table reconciles the decommissioning provisions:

($ thousands) Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions_(note 5)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in estimates(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As at December 31, 2019 7,790 — 1,110 159 (420) 8,639	As at December 31, 2018	As at December 31, 2018
			3,955 961 1,426 153 1,295 7,790

(1) This amount relates to the revaluation of decommissioning provisions using the period end risk-free rate as well as the revaluation of decommissioning provisions acquired using the risk-free discount rate. At the date of acquisitions, the decommissioning provisions were recorded at fair value.

11. SHARE CAPITAL

Authorized

Issued and Outstanding (thousands) Balance, January 1, 2018. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issued pursuant to property acquisition_(note 5)_ . . . . . . . . . . . . . . . . . . . . . . Issued for cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share issue costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax effect of share issue costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2018 and December 31, 2019. . . . . . . . . . . . . . . .	Number of shares 47,165 600 8,100 — — 55,865	Amount ($) 46,883 1,800 8,100 (4) 1 56,780	Amount ($) 46,883 1,800 8,100 (4) 1 56,780
			46,883 1,800 8,100 (4) 1 56,780

Shares Issued For Cash

On October 1, 2014 (“Closing”), the Company entered into a share purchase agreement with Camcor Partners Inc., Annapolis Capital Limited (“Major Investors”) and other investors (collectively referred to as, the “Investors”) for a total financing (including the Common Shares issued on a “flow-through basis”) of up to 82.5 million Common Shares (the “Total Financing”) at a price equal to $1.00 per Common Share (“Issue Price”). The Total Financing is composed of a tier 1 financing (including the Common Shares issued on a “flow-through basis”) of up to $55 million (the “Tier 1 Financing”) and an optional tier 2 financing of up to $27.5 million (the “Tier 2 Financing”). On September 30, 2016, the Tier 2 Financing expired unused.

On July 26, 2018, the Company issued 8.1 million Common Shares for total gross proceeds of $8.1 million under the Tier 1 Financing, the remaining balance of the Tier 1 Financing.

Income Per Share

Basic and diluted income per share is calculated as follows:

($ thousands, except per share amounts) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average Common Shares – basic . . . . . . . . . . . . . . . . . . . Weighted average Common Shares – diluted . . . . . . . . . . . . . . . . . . Income per Common Share – basic . . . . . . . . . . . . . . . . . . . . . . . . Income per Common Share – diluted . . . . . . . . . . . . . . . . . . . . . .	December 31, 2019 10,916 55,865 60,353 0.20 0.18	December 31, 2018	December 31, 2018
			12,953 51,202 58,535 0.25 0.22

The calculation of the diluted income per share for the year ended December 31, 2019 and December 31, 2018 includes the effect of all stock options (“Options”) and performance warrants (“Warrants”) that are in the money as they were dilutive. As at December 31, 2019, all Options and 6.6 million Warrants were in the money.

12. SHARE-BASED COMPENSATION

a) Performance Warrants

The Company is authorized to issue up to 11 million Warrants to purchase Common Shares to directors, officers, employees and consultants to purchase Common Shares, each with an initial term of five years from the date of Closing (or such earlier term as may be determined in accordance with the Warrant certificates). The expiry date of the Warrants can be amended to a later date at the discretion of the Board. If the expiry date is extended beyond the fifth anniversary of Closing, the exercise price for each series shall increase by 8% on the fifth anniversary of Closing and by a further 8% (compounded annually) on each subsequent annual anniversary of Closing.

At December 31, 2019, Astra had 11 million Warrants issued and outstanding. As at December 31, 2019, all of the total outstanding Warrants had Dollar Vested.

A summary of the Warrants outstanding is as follows:

(thousands) Balance, December 31, 2018 and December 31, 2019. . . . . . . . . . . . . . .	Performance Warrants
	11,000

A summary of the number of Warrants that vest upon achieving various price thresholds and at various exercise prices is as follows:

Number of Performance Warrants
(thousands, except per share amounts)
2,200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exercise Price

$1.50
$1.75
$2.00
$2.25
$2.50

b) Stock Options

The Company is authorized to issue Options to purchase Common Shares to directors, officers, employees and consultants of the Company. The number of Common Shares reserved for issuance upon the exercise of the Options is limited to 10% of the number of Common Shares to be issued under the Tier 1 Financing, which is 5.5 million Options. The Options have an initial term of five years from the date of Closing, however the expiry date can be amended to a later date by the discretion of the Board. If the expiry date is extended beyond the fifth anniversary of Closing, the exercise price shall increase by 8% on the fifth anniversary of Closing and by a further 8% (compounded annually) on each subsequent annual anniversary of Closing.

At December 31, 2019, Astra had 5.5 million Options issued and outstanding. As at December 31, 2019, all of the total outstanding Options had Dollar Vested and 5.4 million Options had Time Vested.

Options Outstanding

($ thousands, except per share amounts) Balance, January 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2018 and December 31, 2019 . . . . . . . . . . . . . . . . . . . . .	Weighted average exerciseprice $1.00 $1.00	Stock options
		5,500 5,500

Weighted average risk-free rate (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average expected life (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected volatility (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected forfeiture rate (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Extended Term 1.46 3.01 54 5	Original Term
		1.53 0.02 54 5

The following summarizes the Company’s total share-based compensation related to the Warrants and Options:

($ thousands) Total share-based compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . Total share-based compensation expense . . . . . . . . . . . . . . . . . . . . .	December 31, 2019 7,600 (2,731) 4,869	December 31, 2018	December 31, 2018
			1,001 (353) 648

13. INCOME TAXES

($ thousands) Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Combined federal and provincial income tax rate . . . . . . . . . . . . . . . . . Expected income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) resulting from: Non-deductible items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rate adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2019 16,103 26.78% 4,312 92 1,304 (501) (20) 5,187	December 31, 2018	December 31, 2018
			18,052 27.00% 4,874 50 175 — — 5,099

The corporate tax rate decrease in Alberta for current and future periods that was enacted in the second quarter of 2019 resulted in a decrease in the deferred income tax expense. The estimated impact of the corporate tax rate decrease on deferred tax expense for the year ended December 31, 2019 was $0.5 million.

The following table provides a continuity of the deferred income tax liability:

($ thousands) Property, plant and equipment . . . . . . . . . . . . . . . . . . Decommissioning provision . . . . . . . . . . . . . . . . . . . . Share issue costs and other . . . . . . . . . . . . . . . . . . . . . Financial derivative liability . . . . . . . . . . . . . . . . . . . . Net deferred income tax liability . . . . . . . . . . . . . . . ($ thousands) Property, plant and equipment . . . . . . . . . . . . . . . . . . Decommissioning provision . . . . . . . . . . . . . . . . . . . . Share issue costs and other . . . . . . . . . . . . . . . . . . . . . Non-capital losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability . . . . . . . . . . . . . . . . . . . . Net deferred income tax liability . . . . . . . . . . . . . . .	Jan. 1, 2019 (7,007) 2,103 5 (238) (5,137) Jan. 1, 2018 (4,585) 1,068 29 2,577 332 (579)	Recognized in equity — — — — — Recognized in equity — — 1 — — 1	Recognized in earnings (2,899) 74 3 380 (2,442) Recognized in earnings (2,422) 1,035 (25) (2,577) (570) (4,559)	Dec. 31, 2019	Dec. 31, 2019
				(9,906) 2,177 8 142 (7,579) Dec. 31, 2018
					(7,007) 2,103 5 — (238) (5,137)

The Company had approximately $79.0 million of deductions available for income tax purposes at December 31, 2019 (December 31, 2018 - $78.2 million). At December 31, 2019, the Company had deferred income tax liabilities in excess of its deferred income tax assets.

14. SUPPLEMENTAL CASH FLOW INFORMATION

($ thousands) Source (use) of cash: Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital . . . . . . . . . . . . . . . . . . . . . . . Related to operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Related to financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Related to investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2019 (2,354) (39) (2,107) 2,208 (2,292) 162 — (2,454) (2,292)	December 31, 2018	December 31, 2018
			3,670 (68) (1,697) 540 2,445 2,957 (5) (507) 2,445

15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company’s financial instruments recognized on the statement of financial position consist of trade and other receivables, trade and other payables, bank debt and financial derivatives. The carrying value of these financial instruments approximate their fair value due to the shortterm nature of the instruments.

Credit Risk

The Company assesses quarterly if there has been any impairment of the financial assets of the Company. For the year ended December 31, 2019, the Company expects to collect all financial assets.

The maximum exposure to credit risk is represented by the carrying amount of trade and other receivables. As at December 31, 2019, the Company’s receivables consisted of $5.1 million of receivables from petroleum and natural gas marketers, $2.7 million of receivables from partners in jointly owned assets and $0.1 million of receivables from realized hedging gains. As at December 31, 2019, there are no material financial assets that the Company considers past due. The Company monitors the age of its receivables, investigating the issue behind past due amounts and reviewing the creditworthiness and collection history of the counterparty. As the operator of the properties, the Company does have the ability in most instances to withhold production from partners who are in default of amounts owing.

Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting financial obligations as they become due. The Company’s approach to managing liquidity is to ensure, under a reasonable range of outcomes, that it will have sufficient liquidity to meet its liabilities when due. The Company’s financial liabilities consist of trade and other payables, bank debt, financial derivative liabilities and income taxes payable.

Astra anticipates it will continue to have adequate liquidity to fund its financial liabilities through its available debt financing, future issuances of common shares and cash flow from operations. At December 31, 2019, the Company had net debt (defined as bank debt plus working capital, excluding the fair value of financial derivatives and lease liabilities) of $14.2 million (December 31, 2018 - $20.8 million) and a $50 million credit facility, leaving the Company with $35.8 million of undrawn facility.

Market Risk

Foreign Currency Exchange Risk

Interest Rate Risk

Commodity Price Risk

The following table presents a reconciliation of the change in the unrealized amounts for the periods ended December 31, 2019 and December 31, 2018:

(thousands) Financial derivative asset (liability) as at January 1, 2018 . . . . . . . . . . . . . . . . . . . Unrealized loss on financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative asset as at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain on financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability as at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . .	Fair Value	Fair Value
		(1,231) 2,114 883 (1,445) (562)

As at December 31, 2019, the Company had the following crude oil commodity price contracts in place:

Remaining Period January 1, 2020 – March 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . January 1, 2020 – June 30, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 1, 2020 – December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . .	Commodity Crude Oil Crude Oil Crude Oil	Contract Quantity Contract Price(1) Fair Value At December 31, 2019 Swap 500 bbls/dCAD $76.80/bbl CAD ($86) Swap 1,000 bbls/dCAD $75.08/bbl CAD ($493) Swap 500 bbls/dCAD $74.15/bbl CAD $17	Fair Value At December 31, 2019

(1) NYMEX WTI monthly average converted to Canadian dollars.

Capital Management

These and other factors may adversely affect the Company’s liquidity and the Company’s ability to generate income and cash flows in the future. At December 31, 2019, the Company remains in compliance with the financial covenants contained in the bank facility and based on current available information, management expects to comply with financial covenants during the subsequent 12-month period. However, in light of the current volatility in commodity prices and uncertainty regarding the timing for recovery in such prices, pipeline and transportation capacity constraints, and the effect of the Coronavirus (COVID-19), the preparation of financial forecasts is challenging.

The Company monitors this ratio and endeavors to maintain it at, or below 1.5 to 1.0 in a normalized commodity price environment. This ratio may increase at certain times as a result of acquisitions or low commodity prices. As shown below, as at December 31, 2019, the Company’s ratio of net debt to annualized cash flow was 0.4 to 1.0 (December 31, 2018 – 0.7 to 1.0) .

($ thousands) Bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Working capital deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability (asset) . . . . . . . . . . . . . . . . . . Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted funds flow from current quarter’s operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annualized adjusted funds flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net debt to annualized adjusted funds flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2019 (10,788) (3,943) 562 (14,169) 8,978 35,912 0.4	December 31,2018	December 31,2018
			(15,095) (4,790) (883) (20,768) 7,768 31,072 0.7

The Company is not subject to any externally imposed restrictions on capital.

16. REVENUE

The table details the Company’s petroleum and natural gas sales by product:

($ thousands) Light crude oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Natural gas liquids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Petroleum and natural gas sales . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2019 61,960 35 41 62,036	December 31,2018	December 31,2018
			59,078 274 153 59,505

17. KEY MANAGEMENT PERSONNEL

Key management personnel compensation comprised:

($ thousands) Short-term employee benefits(1) . . . . . . . . . . . . . . . . . . . . . . . . . Long-term Share-based payments(2) . . . . . . . . . . . . . . . . . . . . . Total compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2019 1,010 7,008 8,018	December 31,2018	December 31,2018
			2,456 890 3,346

(1) Includes salaries, annual bonuses and other short-term compensation.

(2) Represents the amortization of share-based compensation associated with the capitalized and non-capitalized portion of Options and Warrants recorded in the financial statements during the respective periods.

18. COMMITMENTS

Office Lease

The Company has a sublease for office premises that expires in 2020. Future minimum lease payments, including operating cost estimates, are as follows:

($ thousands) Less than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As at December 31, 2019
	12

19. SUBSEQUENT EVENTS

Subsequent to December 31, 2019, the Company entered into a head lease for office space which expires on September 30, 2025. This office lease will fall within IFRS 16 Leases with the lease liability and associated asset recognized on the statement of financial position in subsequent periods.

==> picture [148 x 186] intentionally omitted <==

FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2018

MANAGEMENT’S REPORT

March 27, 2019

(Signed) “Andrew Greenslade”

(Signed) “Mark Lobello”

President and Chief Executive Officer

Vice President, Finance and Chief Financial Officer

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of Astra Oil Corp.

Opinion

We have audited the financial statements of Astra Oil Corp. (the “Company”), which comprise:

the statements of financial position as at December 31, 2018 and December 31, 2017
the statements of operations and comprehensive income for the years then ended
the statements of changes in shareholders’ equity for the years then ended
the statements of cash flows for the years then ended
and notes to the financial statements, including a summary of significant accounting policies

(Hereinafter referred to as the “financial statements”).

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2018 and December 31, 2017, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”).

Basis for Opinion

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Information

Management is responsible for the other information. Other information comprises: Management’s Discussion and Analysis.

the information, other than the financial statements and the auditors’ report thereon, included in Management’s Discussion and Analysis.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

We obtained the information, other than the financial statements and the auditors’ report thereon, included in Management’s Discussion and Analysis as at the date of this auditors’ report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditors’ report.

We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report.

However, future events or conditions may cause the Company to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

(signed) “KPMG LLP”

Chartered Professional Accountants

Calgary, Canada

March 27, 2019

ASTRA OIL CORP. Statements of Financial Position

($ thousands)

Assets Current assets Restricted cash_(note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative asset(note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment(note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities Current liabilities Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank debt(note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes payable(note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholder investment held in trust(note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability(note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decommissioning provisions(note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liability(note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholders’ equity Share capital(note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contributed surplus(note 11)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2018 — 5,553 253 883 6,689 7,754 98,141 112,584 10,939 15,095 540 — — 26,574 7,790 5,137 39,501 56,780 5,550 10,753 73,083 112,584	December 31, 2017	December 31, 2017
			450 9,223 185 — 9,858 8,149 65,031 83,038 12,636 14,955 — 450 1,231 29,272 3,955 579 33,806 46,883 4,549 (2,200) 49,232 83,038

Commitments (note 17) Subsequent events (note 18)

See accompanying notes to the financial statements.

On behalf of the Board of Directors:

(Signed) “Ian Fergusson” Director

(Signed) “Jody Forsyth” Director

ASTRA OIL CORP. Statements of Operations and Comprehensive Income

($ thousands, except per share amounts)

Revenue Petroleum and natural gas sales_(note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Realized loss on financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain (loss) on financial derivatives(note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transaction costs(note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation expense(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation(note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depletion and depreciation(note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance expense Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accretion on decommissioning provisions(note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes Current tax expense(note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax expense(note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income and comprehensive income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income per share(note 10)_ Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Year Ended December 31, 2018 60,945 (7,090) 53,855 (3,227) 2,114 52,742 9,259 978 2,894 34 1,496 648 18,474 33,783 18,959 754 153 907 18,052 540 4,559 12,953 0.25 0.22	Year Ended December 31,2017	Year Ended December 31,2017
			21,297 (1,957) 19,340 (177) (1,231) 17,932 5,089 528 1,419 127 40 1,437 7,841 16,481 1,451 136 54 190 1,261 — 682 579 0.01 0.01

See accompanying notes to the financial statements.

ASTRA OIL CORP.

Statements of Changes in Shareholders’ Equity

($ thousands)

Balance, January 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issue of common shares_(note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share issue costs (net of tax) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation(note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, January 1, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issue of common shares(note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share issue costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation(note 11)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Number of Shares 47,165 8,700 — — — 55,865 28,265 18,900 — — — 47,165	Share Capital 46,883 9,900 (3) — — 56,780 27,895 18,900 88 — — 46,883	Contributed Surplus 4,549 — — 1,001 — 5,550 2,315 — — 2,234 — 4,549	Retained Earnings (Deficit) (2,200) — — — 12,953 10,753 (2,779) — — — 579 (2,200)	Total Shareholders’ Equity	Total Shareholders’ Equity
						49,232 9,900 (3) 1,001 12,953 73,083 27,431 18,900 88 2,234 579 49,232

See accompanying notes to the financial statements.

ASTRA OIL CORP. Statements of Cash Flows

($ thousands)

Operating Activities Income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to add (deduct) non-cash items: Depletion and depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized loss (gain) on financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accretion on decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital_(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financing Activities Proceeds from issue of common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share issue costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investing Activities Expenditures on exploration and evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenditures on property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenditures on property acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital(note 13)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Year Ended December 31, 2018 12,953 18,474 1,496 (2,114) 648 153 4,559 2,957 39,126 8,100 (4) 140 (5) 8,231 (1,053) (2,224) (41,462) (2,111) (507) (47,357) — — — 641	Year Ended December 31, 2017	Year Ended December 31, 2017
			579 7,841 40 1,231 1,437 54 682 (1,564) 10,300 18,900 (15) 14,955 5 33,845 (2,063) (275) (43,151) (3,780) 1,880 (47,389) (3,244) 3,244 — 93

See accompanying notes to the financial statements.

ASTRA OIL CORP. Notes to the Financial Statements As at and for the years ended December 31, 2018 and 2017

1. REPORTING ENTITY

Astra Oil Corp. (“Astra” or the “Company”) is a private company that was incorporated as 1812581 Alberta Ltd. under the Business Corporations Act (Alberta) on April 1, 2014. On June 4, 2014, the Company amended its articles of incorporation to change its name to Astra Oil Corp. The Company is principally engaged in the acquisition, exploration, development and production of oil and natural gas reserves in western Canada and as such, is defined as having only one industry in one geographic segment. Astra’s principal place of business is located at Suite 1120, 255-5[th] Avenue SW, Calgary, Alberta, Canada, T2P 3G6.

2. BASIS OF PRESENTATION

Statement of Compliance

These financial statements were authorized for issue by the Board of Directors on March 27, 2019.

Basis of Measurement

These financial statements have been prepared on the historical cost basis except where noted within the accounting policies.

Functional and Presentation Currency

These financial statements are presented in Canadian dollars which is the Company’s functional currency.

Use of Estimates and Judgments

Use of Estimates

Reserve Estimates

Oil and Gas Activities (“NI 51-101”). Under NI 51-101 standards, proved plus probable reserves are considered a “best estimate” of future recoverable reserves.

Business Combinations

Decommissioning Provisions

Derivatives

The Company’s estimate of the fair value of derivative financial instruments is dependent on estimate forward prices and volatility in those prices.

Income Taxes

Share-Based Compensation

Judgments

Cash Generating Unit (“CGU”)

Impairment

Exploration and Evaluation (“E&E”) Assets

Income Taxes

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all years presented in these financial statements, except as disclosed herein.

Property, Plant and Equipment and Exploration and Evaluation Assets

Recognition and Measurement

Exploration and Evaluation Expenditures:

Pre-license costs are recognized in earnings as incurred.

Development and Production Costs:

Subsequent Costs

Costs incurred subsequent to the determination of technical feasibility and commercial viability and the costs of replacing parts of property, plant and equipment are recognized as oil and natural gas interests only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in earnings as incurred. Such capitalized oil and natural gas interests generally represent costs incurred in developing proved and/or probable reserves and bringing on or enhancing production from such reserves, and are accumulated on a field or geotechnical area basis. The carrying amount of any replaced or sold component is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in earnings as operating costs as incurred.

Depletion and Depreciation

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, term deposits held with banks and other short-term highly liquid investments with original maturities of three months or less.

Financial Instruments

Non-Derivative Financial Instruments

Non-derivative financial instruments are comprised of cash and cash equivalents, restricted cash, trade and other receivables, trade and other payables, bank debt and shareholder investment held in trust. Non-derivative financial instruments are recognized initially at fair value plus, for instruments not at fair value through earnings, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below.

Non-derivative financial instruments, such as trade and other receivable, trade and other payables, bank debt and shareholder investment held in trust, are measured at amortized cost using the effective interest method, less any impairment losses.

Derivative Financial Instruments

Share Capital

Impairment

Financial Assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. For financial assets measured at amortized cost the reversal is recognized in earnings.

Non-Financial Assets

Leased Assets

Leases where the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Minimum lease payments made under finance leases are apportioned between the finance expenses and the reduction of the outstanding liability. The finance expenses are allocated each year during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Other leases are operating leases, which are not recognized on the Company’s statement of financial position. Payments made under operating leases are recognized in earnings on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense over the term of the lease.

Share-Based Compensation

Long term incentives are granted to officers, directors, employees and consultants in accordance with the Company’s stock option and performance warrant plans.

The grant date fair value of stock options and performance warrants are recognized as compensation expense, with a corresponding increase in contributed surplus over the vesting period. The Company uses the Black-Scholes option pricing model to determine the fair value of stock options and performance warrants granted. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of long term incentives that are forfeited. Upon the exercise of the long term incentives, consideration paid, together with the amount previously recognized in contributed surplus, is recorded as an increase in share capital. In the event that vested long term incentives expire, previously recognized compensation expense associated with such long term incentives is not reversed. In the event that the long term incentives are forfeited, previously recognized compensation expense associated with the unvested portion of such long term incentives is reversed.

Flow-Through Shares

Periodically, the Company finances a portion of its exploration and development activities through the issuance of flow-through shares. The resource expenditure deductions for income tax purposes related to exploratory and development activities are renounced to investors in accordance with tax legislation. Flow-through shares issued are recorded in share capital at the fair value of common shares on the date of issue. The premium received on issuing flow-through shares is initially recorded as a liability. As qualifying expenditures are incurred, the premium is reversed and a deferred income tax liability is recorded. The net amount is then recognized as deferred income tax expense.

Revenue Recognition

Royalty income is recognized as it accrues in accordance with the terms of the overriding royalty agreements.

Transportation

Costs paid by Astra for the transportation of crude oil, natural gas and natural gas liquids from the wellhead to the point of title transfer are recognized when the transportation is provided.

Income Tax

Deferred tax is recognized on the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized on the initial recognition of assets or liabilities in a transaction that is not a business combination.

The Company follows the asset/liability method for calculating deferred income taxes. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

Per Share Amounts

Change in Accounting Policies

IFRS 9

On January 1, 2018, the Company adopted IFRS 9 – Financial Instruments, which replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. The new standard includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39.

The three principal classification categories under the new standard for financial instruments are: measured at amortized cost, fair value through other comprehensive income (“FVOCI”) and fair value through profit and loss (“FVTPL”). The classification of financial instruments under IFRS 9 is generally based on the business model in which a financial instrument is managed and its contractual cash flow characteristics. The previous categories under IAS 39 of held to maturity, loans and receivables and available for sale have been removed.

IFRS 9 replaces the “incurred loss” model in IAS 39 with an “expected loss” model. The new impairment model applies to financial instruments measured at amortized cost, and contract assets and debt investments measured at FVOCI. Under IFRS 9, credit losses will be recognized earlier than under IAS 39.

Cash and cash equivalents, restricted cash, trade and other receivables, trade and other payables, shareholder investment held in trust and bank debt continue to be measured at amortized cost and are now classified as “amortized cost”. There were no changes to the Company’s classifications of its financial instrument assets and liabilities as FVTPL. None of the Company’s financial instruments have been classified as FVOCI.

The Company did not formerly apply hedge accounting to its financial instruments and has not elected to apply hedge accounting to any of its financial instruments upon adoption of IFRS 9. There was no impact to the Company as a result of adopting the new standard.

IFRS 15

On January 1, 2018, the Company adopted IFRS 15 – Revenue from Contracts with Customers, which establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programs. The Company has adopted IFRS 15 using the modified retrospective approach on January 1, 2018. Based on the Company’s review of contracts with customers and its assessment of various revenue streams using the IFRS 15 five step model there were no material changes to net income, the timing of revenue recognized, income statement line classification or to opening retained earnings as at January 1, 2018. Astra has expanded disclosures in the notes to its interim condensed financial statements as prescribed by IFRS 15, including disclosing the Company’s disaggregated revenue streams by product type. As a result of adopting IFRS 15, the Company’s revenue recognition policy has been amended in the policy notes.

IFRS 16

As of January 1, 2019, the Company will be required to adopt IFRS 16 Leases, which will replace IAS 17 Leases and IFRIC 4 Determining Whether an Arrangement Contains a Lease. On adoption of IFRS 16, the Company will recognize lease liabilities related to leases previously classified as operating leases. The lease liability will be calculated as the present value of the remaining lease payments, discounted using the Company’s borrowing rate on January 1, 2019. The Company plans to use the modified retrospective approach on adoption of IFRS 16 and intends to use the following practical expedients permitted under the standard.

Some of these expedients are on a lease-by-lease basis and others are applicable by class of underlying assets:

Account for leases with a remaining term of less than 12 months at January 1, 2019 as short-term leases; and
Account for lease payments as an expense and not recognize a right-of-use asset if the underlying asset is of a lower dollar value.

As of December 31, 2018, the Company is in the process of finalizing the full financial impact of IFRS 16 and developing and implementing policies, internal controls and processes.

4. DETERMINATION OF FAIR VALUES

Measurement

Astra classifies the fair value of these transactions according to the following hierarchy based on the amount of observable inputs used to value the instrument.

Level 3 – Valuations in this level are those with inputs for the asset or liability that are not based on observable market data.

Property, Plant and Equipment and Exploration and Evaluation Assets (“Property, Plant and Equipment”)

The fair value of property, plant and equipment recognized in an acquisition is based on market values. The market value of Property, Plant and Equipment is the estimated amount for which Property, Plant and Equipment could be exchanged on the acquisition date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value of oil and natural gas interests (included in Property, Plant and Equipment) and exploration and evaluation assets is estimated with reference to the discounted cash flows expected to be derived from oil and natural gas production based on externally prepared reserve reports. The risk-adjusted discount rate is specific to the asset with reference to general market conditions.

The market value of other items of Property, Plant and Equipment is based on the quoted market prices for similar items.

Cash and Cash Equivalents, Restricted Cash, Trade and Other Receivables, Prepaid Expenses and Deposits and Trade and Other Payables, Bank Debt and Shareholder Investment Held in Trust

The fair value of cash and cash equivalents, restricted cash, trade and other receivables, prepaid expenses and deposits, trade and other payables, bank debt and shareholder investment held in trust is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. The fair value of these balances approximated their carrying value due to their short term to maturity.

Derivatives

Stock Options and Performance Warrants

volatility, weighted average expected life of the instruments (based on historical experience and general option holder behavior) and the riskfree interest rate (based on government bonds).

5. PROPERTY ACQUISITIONS

($ thousands) Cash consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Amount	Amount
		1,443 1,443 2,310 (867) 1,443

The fair value of decommissioning provisions were initially estimated using a credit adjusted rate of 8 percent.

The statement of operations and comprehensive income include the results of operations for the period following the close of the transaction on January 31, 2018. For the year ended December 31, 2018 the statement of operations and comprehensive income includes $1.4 million of petroleum and natural gas revenue and $1.0 million of net income generated from the acquired assets since the acquisition on January 31, 2018.

If the assets had been acquired on January 1, 2018, approximately an additional $0.04 million of petroleum and natural gas revenue and $0.03 million of net income would have been included on the statement of operations and comprehensive income for the year ended December 31, 2018. The additional petroleum and natural gas revenue and net income estimates may not be representative of the results had the acquisition actually occurred on January 1, 2018.

($ thousands) Cash consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issuance of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Amount	Amount
		2,732 1,800 4,532 1,847 2,779 (94) 4,532

The fair value of decommissioning provisions were initially estimated using a credit adjusted rate of 8 percent.

The statement of operations and comprehensive income include the results of operations for the period following the close of the transaction on February 26, 2018. For the year ended December 31, 2018 the statement of operations and comprehensive income includes $0.9 million of petroleum and natural gas revenue and $0.4 million of net income generated from the acquired assets since the acquisition on February 26, 2018.

If the assets had been acquired on January 1, 2018, approximately an additional $0.2 million of petroleum and natural gas revenue and $0.1 million of net income would have been included on the statement of operations and comprehensive income for the year ended December 31, 2018. The additional petroleum and natural gas revenue and net income estimates may not be representative of the results had the acquisition actually occurred on January 1, 2018.

On May 9, 2017, Astra acquired certain interests in petroleum and natural gas properties and undeveloped land located in southeast Saskatchewan for cash consideration of approximately $3.8 million. In connection with the transaction, the Company incurred associated decommissioning liabilities of $0.1 million.

($ thousands) Cash consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Amount	Amount
		3,780 3,780 3,903 (123) 3,780

The fair value of decommissioning provisions were initially estimated using a credit adjusted rate of 8 percent.

6. EXPLORATION AND EVALUATION ASSETS

($ thousands) Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions_(note 5)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation expense . . . . . . . . . . . . . . . . . . . . . . . . . Transfers to property, plant and equipment . . . . . . . . . . . . . . . . . . . . Balance, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As at December 31, 2018 8,149 2,939 1,053 (1,496) (2,891) 7,754	As At December 31, 2017	As At December 31, 2017
			8,242 275 2,063 (40) (2,391) 8,149

E&E assets consist of Astra’s exploration projects for which the determination of proved or probable reserves is pending. Additions represent Astra’s share of costs incurred on E&E assets during the period. Acquisitions for the period related to undeveloped land acquired from an oil and gas producer. The cost of undeveloped land that expires during a period is recognized in earnings.

On December 19, 2018, Astra closed an asset purchase agreement to acquire land in southeast Saskatchewan for total cash consideration of $0.16 million.

Impairment Assessment

In accordance with IFRS, an impairment test is performed if the Company identifies an indicator of impairment. At December 31, 2018 and 2017, the Company determined that no indicators of impairment existed on its E&E assets; therefore, impairment tests were not performed.

7. PROPERTY, PLANT AND EQUIPMENT

($ thousands) Cost: Balance, January 1, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions_(note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized general and administrative costs . . . . . . . . . . . . . . . . . . . Capitalized share-based compensation(note 11) . . . . . . . . . . . . . . . Transfer from exploration and evaluation assets(note 6) . . . . . . . . . Change in decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions(note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized general and administrative costs . . . . . . . . . . . . . . . . . . . Capitalized share-based compensation(note 11) . . . . . . . . . . . . . . . Transfer from exploration and evaluation assets(note 6)_ . . . . . . . . . Change in decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depletion and depreciation: Balance, January 1, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depletion and depreciation for the year . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depletion and depreciation for the year . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net carrying value: Balance, December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Petroleum and Natural Gas Assets 23,564 3,903 42,366 774 797 2,391 2,347 76,142 4,157 40,595 850 353 2,891 2,721 127,709 3,354 7,822 11,176 18,458 29,634 64,966 98,075	Office Equipment 105 — 11 — — — — 116 — 17 — — — — 133 32 19 51 16 67 65 66	Total
			23,669 3,903 42,377 774 797 2,391 2,347
			76,258 4,157 40,612 850 353 2,891 2,721
			127,842
			3,386 7,841
			11,227 18,474
			29,701
			65,031 98,141

Future Development Costs and Salvage Value

At December 31, 2018, future development costs of $130.6 million (December 31, 2017 - $80.9 million) associated with proved plus probable undeveloped reserves are included in costs subject to depletion. An estimated $4.6 million (December 31, 2017 -$3.4 million) of salvage value on production equipment is excluded from the costs subject to depletion.

Impairment Assessment

In accordance with IFRS, an impairment test is performed on a CGU if the Company identifies an indicator of impairment. At December 31, 2018 and December 31, 2017, the Company determined that no indicators of impairment existed; therefore, impairment tests were not performed.

8. BANK FACILITY

As at December 31, 2018, the Company had available a $40.0 million revolving operating demand credit facility (“Credit Facility”) with a Canadian chartered bank. The Credit Facility provides that advances may be made by way of direct prime rate loans, bankers’ acceptances, letters of credit or letters of guarantee. The Credit Facility bears interest on a grid system depending on the Company’s debt to cash flow ratio ranging from less than or equal to 1:1, to greater than 3:1. The Credit Facility is secured by a $100 million debenture and a general security agreement over all the petroleum and natural gas assets of the Company.

compliance with all covenants outlined in the credit agreement. The Company completed its customary borrowing base review on December 20, 2018 with no changes made to Astra’s borrowing base. The Company’s next borrowing base review is scheduled for April 30, 2019.

9. DECOMMISSIONING PROVISIONS

The Company’s decommissioning provisions result from its ownership interest in all its wells and facilities. The total decommissioning provision is estimated based on the Company’s net ownership interest in all of its wells and facilities, estimated costs to reclaim and abandon these wells and facilities and the estimated timing of the costs to be incurred in future years. The Company has estimated the net present value of the decommissioning provisions based on an undiscounted total future provision of $10.6 million (December 31, 2017—$5.5 million). These payments are expected to be incurred over the next 10 to 25 years. At December 31, 2018, a risk-free rate of 2.18 percent (December 31, 2017 – 2.26 percent) and an inflation rate of 2 percent (December 31, 2017 – 2 percent) were used to calculate the net present value of the decommissioning provisions.

The following table reconciles the decommissioning provisions:

($ thousands) Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions_(note 5)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in estimates(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As at December 31, 2018 3,955 961 1,426 153 1,295 7,790	As at December 31, 2017
		1,431 123 1,807 54 540 3,955

(1) This amount relates to the revaluation of decommissioning provisions using the period end risk-free rate as well as the revaluation of decommissioning provisions acquired using the risk-free discount rate. At the date of acquisitions, the decommissioning provisions were recorded at fair value.

10. SHARE CAPITAL

Authorized

Issued and Outstanding

(thousands) Balance, January 1, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issued for cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share issue costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax effect of share issue costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issued pursuant to property acquisition_(note 5)_ . . . . . . . . . . . . . . . . . . . . . . . . Issued for cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share issue costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax effect of share issue costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Number of shares 28,265 18,900 — — 47,165 600 8,100 — — 55,865	Amount ($)
		27,895 18,900 (15) 103 46,883 1,800 8,100 (4) 1 56,780

Shares Issued For Cash

At Closing, each investor subscribed for units (“Investment Units”) at a price of $1.00 per Investment Unit. Each Investment Unit consisted of one (1) Special Voting Share and one (1) call obligation (each a “Call Obligation”). Each Special Voting Share has the same voting rights as a Common Share. Following approval of the Major Investors and the board of directors of the Company (the “Board”), each Call Obligation

requires the holder thereof to subscribe for one (1) Common Share at a price of $1.00 per Common Share at any time during the Tier 1 Capital Call Period (as defined below), and upon the issuance of a Common Share pursuant to a Call Obligation, an equal number of Special Voting Shares shall be cancelled in accordance with their terms.

The drawdown on the Tier 1 Financing must be completed between Closing and the date that is three years thereafter (the “Tier 1 Capital Call Period”). The Board may, in its sole direction, extend the Tier 1 capital call period but may not extend it beyond five years from the date of the Closing. To the extent that any Call Obligations remain outstanding at the end of the Tier 1 Capital Call Period, the Call Obligations and related outstanding Special Voting Shares shall be terminated and cancelled and be of no further force or effect. On September 7, 2017, the Tier 1 Capital Call Period was extended to July 31, 2018.

On July 26, 2018, the Company issued 8.1 million Common Shares for total gross proceeds of $8.1 million under the Tier 1 Financing, the remaining balance of the Tier 1 Financing.

On October 11, 2017, the Company issued 5.4 million Common Shares for total gross proceeds of $5.4 million under the Tier 1 Financing.

On May 2, 2017, the Company issued 8.1 million Common Shares for total gross proceeds of $8.1 million under the Tier 1 Financing.

On January 31, 2017, the Company issued 5.4 million Common Shares for total gross proceeds of $5.4 million under the Tier 1 Financing.

A group of President’s List investors subscribing under the Tier 1 Financing, in the amount of $3.0 million, fully funded their complete investment at the time of Closing. The portion of this initial investment which has yet to be drawn under the Tier 1 Financing is held in restricted cash as an asset and shareholder investment held in trust as a liability on the statement of financial position. On July 26, 2018, the remaining $0.45 million was drawn in conjunction with the Company’s issuance of 8.1 million Common Shares under the Tier 1 Financing.

Income Per Share

Basic and diluted income per share is calculated as follows:

($ thousands, except per share amounts) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average Common Shares – basic . . . . . . . . . . . . . . . . . . . Weighted average Common Shares – diluted . . . . . . . . . . . . . . . . . . Income per Common Share – basic . . . . . . . . . . . . . . . . . . . . . . . . Income per Common Share – diluted . . . . . . . . . . . . . . . . . . . . . .	December 31, 2018 12,953 51,202 58,535 0.25 0.22	December 31, 2017	December 31, 2017
			579 39,849 39,849 0.01 0.01

The calculation of the diluted income per share for the year ended December 31, 2018 includes the effect of all stock options (“Options”) and performance warrants (“Warrants”) as they were all dilutive. The calculation of the diluted income per share for the year ended December 31, 2017 excludes the effect of all Options and Warrants as they were anti-dilutive. Therefore, the diluted per share amount for the net income is equivalent to the basic per share amount.

11. SHARE-BASED COMPENSATION

a) Performance Warrants

The Company is authorized to issue up to 11 million Warrants to purchase Common Shares to directors, officers, employees and consultants to purchase Common Shares, each with an initial term of five years from the date of Closing (or such earlier term as may be determined in accordance with the Warrant certificates). The expiry date of the Warrants can be amended to a later date at the discretion of the Board. If the expiry date is extended beyond the fifth anniversary of Closing, the exercise price for each series shall increase by 8% on the fifth anniversary of Closing and by a further 8% (compounded annually) on each subsequent annual anniversary of Closing.

At December 31, 2018, Astra had 11 million Warrants issued and outstanding. As at December 31, 2018, all of the total outstanding Warrants had Dollar Vested.

A summary of the Warrants outstanding is as follows:

(thousands) Balance, December 31, 2017 and December 31, 2018. . . . . . . . . . . . . . .	Performance Warrants 11,000

A summary of the number of Warrants that vest upon achieving various price thresholds and at various exercise prices is as follows:

Number of Performance Warrants

Exercise Price

$1.50
$1.75
$2.00
$2.25
$2.50

b) Stock Options

The Company is authorized to issue Options to purchase Common Shares to directors, officers, employees and consultants of the Company. The number of Common Shares reserved for issuance upon the exercise of the Options is limited to 10% of the number of Common Shares to be issued under the Tier 1 Financing, which is 5.5 million Options. The Options have an initial term of five years from the date of Closing, however the expiry date can be amended to a later date by the discretion of the Board. If the expiry date is extended beyond the fifth anniversary of Closing, the exercise price shall increase by 8% on the fifth anniversary of Closing and by a further 8% (compounded annually) on each subsequent annual anniversary of Closing.

At December 31, 2018, Astra had 5.5 million Options issued and outstanding. As at December 31, 2018, all of the total outstanding Options had Dollar Vested and 5.1 million Options had Time Vested.

Options Outstanding

($ thousands, except per share amounts) Balance, January 1, 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2017 and December 31, 2018 . . . . . . . . . . . . . . . . . . .	Weighted average exerciseprice $1.00 $1.00 $1.00	Stock options
		5,300 200 5,500

The fair market value of each Option granted was estimated on the date of issue using the Black-Scholes option pricing model with the following assumptions:

	2017
Weighted average risk-free rate (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1.52
Weighted average expected life (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5.0
Expected volatility (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	54
Expected forfeiture rate (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Weighted average fair value ($/option) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	0.47

Share-based compensation of $0.6 million was expensed during year ended December 31, 2018 (December 31, 2017—$1.4 million), while $0.4 million (December 31, 2017 - $0.8 million) in share-based compensation was capitalized during the same period. The following summarizes the Company’s total share-based compensation related to the Warrants and Options:

($ thousands) Total share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized share-based compensation . . . . . . . . . . . . . . . . . . . . . . . Total share-based compensation expense . . . . . . . . . . . . . . . . . . .	December 31, 2018 1,001 (353) 648	December 31, 2017	December 31, 2017
			2,234 (797) 1,437

12. INCOME TAXES

($ thousands) Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Combined federal and provincial income tax rate . . . . . . . . . . . . . . . Expected income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) resulting from: Change in unrecognized deferred income tax asset . . . . . . . . . . Non-deductible items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in estimates and other . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2018 18,052 27.00% 4,874 — 50 175 — 5,099	December 31, 2017 1,261 26.86% 339 (67) 20 386 4 682	December 31, 2017 1,261 26.86% 339 (67) 20 386 4 682
			1,261 26.86% 339 (67) 20 386 4 682

The following table provides a continuity of the deferred income tax liability:

($ thousands) Property, plant and equipment . . . . . . . . . . . . . . . . . . Decommissioning provision . . . . . . . . . . . . . . . . . . . . SIC and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-capital losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability . . . . . . . . . . . . . . . . . . . . Net deferred income tax liability . . . . . . . . . . . . . . . ($ thousands) Property, plant and equipment . . . . . . . . . . . . . . . . . . Decommissioning provision . . . . . . . . . . . . . . . . . . . . SIC and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-capital losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability . . . . . . . . . . . . . . . . . . . . Net deferred income tax liability . . . . . . . . . . . . . . .	Jan. 1, 2018 (4,585) 1,068 29 2,577 332 (579) Jan. 1, 2017 (1,891) 387 — 1,504 — —	Recognized in equity — — 1 — — 1 Recognized in equity — — 103 — — 103	Recognized in earnings (2,422) 1,035 (25) (2,577) (570) (4,559) Recognized in earnings (2,694) 681 (74) 1,073 332 (682)	Dec. 31, 2018	Dec. 31, 2018
				(7,007) 2,103 5 — (238) (5,137) Dec. 31, 2017
					(4,585) 1,068 29 2,577 332 (579)

The Company had approximately $78.2 million of deductions available for income tax purposes at December 31, 2018 (December 31, 2017 - $64.3 million). At December 31, 2018, the Company had deferred income tax liabilities in excess of its deferred income tax assets.

13. SUPPLEMENTAL CASH FLOW INFORMATION

($ thousands) Source (use) of cash: Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital . . . . . . . . . . . . . . . . . . . . . . . Related to operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Related to financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Related to investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2018 3,670 (68) (1,697) 540 2,445 2,957 (5) (507) 2,445	December 31, 2017 (6,872) (87) 7,280 — 321 (1,564) 5 1,880 321	December 31, 2017 (6,872) (87) 7,280 — 321 (1,564) 5 1,880 321
			(6,872) (87) 7,280 — 321 (1,564) 5 1,880 321

14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company’s financial instruments recognized on the statement of financial position consist of cash and cash equivalents, restricted cash, trade and other receivables, trade and other payables, bank debt and shareholder investment held in trust. The carrying value of these financial instruments approximate their fair value due to the short-term nature of the instruments.

Credit Risk

The Company assesses quarterly if there has been any impairment of the financial assets of the Company. For the year ended December 31, 2018, the Company expects to collect all financial assets.

The maximum exposure to credit risk is represented by the carrying amount of cash and cash equivalents, financial derivative contracts and trade and other receivables. As at December 31, 2018, the Company’s receivables consisted of $3.4 million of receivables from petroleum and natural gas marketers, $1.9 million of receivables from partners in jointly owned assets and $0.3 million of receivables from realized hedging gains. As at December 31, 2018, there are no material financial assets that the Company considers past due.

Liquidity Risk

The Company ensures that is has sufficient cash available to meet expected operational and capital expenses for a reasonable period. To achieve this objective, the Company prepares annual operational and capital expenditure budgets and associated liquidity forecasts, which are regularly monitored and updated as considered necessary. Further, the Company utilizes authorizations for expenditures to further manage capital expenditures. The Company also mitigates liquidity risk by maintaining an insurance program to manage exposure to insurable losses.

Astra anticipates it will continue to have adequate liquidity to fund its financial liabilities through future debt financing, future issuances of common shares and cash flow from operations. At December 31, 2018, the Company had net debt (defined as bank debt plus working capital, adjusted for the fair value of financial derivatives) of $20.8 million (December 31, 2017—$18.2 million) and a $40 million credit facility.

Market Risk

Foreign Currency Exchange Risk

Interest Rate Risk

Commodity Price Risk

The following table presents a reconciliation of the change in the unrealized amounts for the periods ended December 31, 2018 and December 31, 2017:

(thousands) Financial derivative asset (liability) as at January 1, 2017 . . . . . . . . . . . . . . . . . . . . Unrealized loss on financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability as at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain on financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative asset as at December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . .	Fair Value	Fair Value
		— (1,231) (1,231) 2,114 883

As at December 31, 2018, the Company had the following crude oil commodity price contracts in place:

Remaining Period January 1, 2019 – March 31, 2019 . . . . . . . . January 1, 2019 – March 31, 2019 . . . . . . . .	Commodity Crude Oil Crude Oil	Contract Quantity Swap 400 bbls/d Swap 100 bbls/d	Contract Price(1) CAD$82.85/bbl CAD$79.95/bbl	Fair Value At December 31, 2018 CAD$ 727 CAD$ 156

(1) NYMEX WTI monthly average converted to Canadian dollars.

Capital Management

The Company monitors this ratio and endeavors to maintain it at, or below 1.5 to 1.0 in a normalized commodity price environment. This ratio may increase at certain times as a result of acquisitions or low commodity prices. As shown below, as at December 31, 2018, the Company’s ratio of net debt to annualized cash flow was 0.7 to 1.0 (December 31, 2017 – 0.7 to 1.0).

($ thousands) Bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Working capital deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability (asset) . . . . . . . . . . . . . . . . . . . . . Net debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted funds flow from current quarter’s operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annualized adjusted funds flow from operating activities . . . . . Net debt to annualized adjusted funds flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2018 (15,095) (4,790) (883) (20,768) 7,768 31,072 0.7	December 31, 2017	December 31, 2017
			(14,955) (4,459) 1,231 (18,183) 6,264 25,056 0.7

The Company is not subject to any externally imposed restrictions on capital.

15. REVENUE

The table details the Company’s petroleum and natural gas sales by product:

($ thousands) Light crude oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Natural gas liquids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Petroleum and natural gas sales . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2018 59,078 1,249 618 60,945	December 31, 2017	December 31, 2017
			20,584 427 286 21,297

16. KEY MANAGEMENT PERSONNEL

Key management personnel compensation comprised:

($ thousands) Short-term employee benefits(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term Share-based payments(2) . . . . . . . . . . . . . . . . . . . . . . . . . Total compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	December 31, 2018 2,456 890 3,346	December 31, 2017	December 31, 2017
			1,383 2,028 3,411

(1) Includes salaries, annual bonuses and other short-term compensation.

17. COMMITMENTS

Office Lease

The Company has a sublease for office premises that expires in 2020. Future minimum lease payments, including operating cost estimates, are as follows:

($ thousands) Less than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Between two and five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As at December 31, 2018
	101 17 118

18. SUBSEQUENT EVENTS

Subsequent to December 31, 2018, the Company entered into the following crude oil commodity price contracts summarized below:

Period April 1, 2019 – December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . .	Commodity Crude Oil	Contract Quantity Swap 1,000 bbls/d	Contract Price(1)
			CAD $79.53/bbl

(1) NYMEX WTI monthly average converted to Canadian dollars.

SCHEDULE B TO APPENDIX G

Interim Unaudited Financial Statements of AOC for the Three-Month Period Ended March 31, 2021

(see attached)

==> picture [174 x 200] intentionally omitted <==

CONDENSED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 (UNAUDITED)

NOTIFICATION OF UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed the unaudited condensed interim financial statements for the three months ended March 31, 2021.

ASTRA OIL CORP. Condensed Interim Statements of Financial Position

($ thousands)

(Unaudited) Assets Current assets Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative asset (note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation_(note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment(note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities Current liabilities Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank debt(note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease liability(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decommissioning provisions(note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease liability(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholders’ equity Share capital(note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contributed surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commitments(note 15)_	March 31, 2021 10,451 297 1,419 12,167 493 5,082 159,294 2,315 179,351 13,055 15,553 218 6,619 35,445 17,584 591 53,620 78,027 13,155 34,549 125,731 179,351	December 31, 2020	December 31, 2020
			7,692 371 1,419 9,482 6,600 155,574 1,616 173,272 8,022 16,397 242 1,666 26,327 18,355 627 45,309 78,027 13,155 36,781 127,963 173,272

See accompanying notes to the condensed interim financial statements.

ASTRA OIL CORP. Condensed Interim Statements of Operations and Comprehensive Loss

($ thousands, except per share amounts)

(Unaudited) Revenue Petroleum and natural gas revenue_(note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Realized gain (loss) on financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain (loss) on financial derivatives(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net revenue after financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation expense(note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation(note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depletion and depreciation(note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment(note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance expense Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accretion on decommissioning provisions(note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxes Current income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income tax reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Carbon tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss and comprehensive loss for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss per share(note 10)_ Basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Three Months Ended March 31, 2021 18,809 (3,348) 15,461 (2,270) (4,460) 8,731 2,729 260 620 1,588 — 6,163 — 53 11,413 (2,682) 177 55 232 (2,914) — (699) 17 (2,232) (0.03)	Three Months Ended March 31, 2020	Three Months Ended March 31, 2020
			11,688 (1,978) 9,710 1,944 6,752 18,406 2,296 266 549 155 1 5,975 12,322 — 21,564 (3,158) 134 38 172 (3,330) 641 (1,429) — (2,542) (0.05)

See accompanying notes to the condensed interim financial statements.

ASTRA OIL CORP. Condensed Interim Statements of Changes in Shareholders’ Equity

($ thousands)

(Unaudited) Balance, January 1, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, March 31, 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation_(note 11)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at March 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Number of Shares 68,006 — 68,006 55,865 — — 55,865	Share Capital 78,027 — 78,027 56,780 — — 56,780	Contributed Surplus 13,155 — 13,155 13,150 2 — 13,152	Retained Earnings 36,781 (2,232) 34,549 21,669 — (2,542) 19,127	Total Shareholders’ Equity	Total Shareholders’ Equity
						127,963 (2,232) 125,731 91,599 2 (2,542) 89,059

See accompanying notes to the condensed interim financial statements.

ASTRA OIL CORP. Condensed Interim Statements of Cash Flows

($ thousands)

(Unaudited) Operating Activities Loss for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments for non-cash items: Depletion and depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation_(note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized loss (gain) on financial derivatives(note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation (_note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease interest expense_(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accretion on decommissioning provisions(note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment(note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital(note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financing Activities Change in bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease payments(note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital(note 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows from (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investing Activities Expenditures on exploration and evaluation(note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenditures on property, plant and equipment(note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital(note 12)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Three Months Ended March 31, 2021 (2,232) 6,163 1,588 4,460 — 10 55 (699) — 672 10,017 (844) (70) (35) (949) (70) (10,709) 1,711 (9,068) — — — 166	Three Months Ended March 31, 2020	Three Months Ended March 31, 2020
			(2,542) 5,975 155 (6,752) 1 7 38 (1,429) 12,322 (1,317) 6,458 5,472 (1) — 5,471 (276) (9,270) (2,383) (11,929) — — — 127

See accompanying notes to the condensed interim financial statements.

ASTRA OIL CORP. Notes to the Condensed Interim Financial Statements As at March 31, 2021 and for the three months ended March 31, 2021 and 2020 (Unaudited)

1. REPORTING ENTITY

2. BASIS OF PRESENTATION

Statement of Compliance

These condensed interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including IAS 34 “Interim Financial Reporting”. The condensed interim financial statements use the accounting policies which the Company applied in its annual financial statements for the year ended December 31, 2020, except as noted below. These condensed interim financial statements do not include all the information required for full annual financial statements and should be read in conjunction with the Company’s audited annual financial statements for the year ended December 31, 2020.

These condensed interim financial statements were authorized for issue by the Board of Directors on May 26, 2021.

Functional and Presentation Currency

These condensed interim financial statements are presented in Canadian dollars which is the Company’s functional currency.

Use of Estimates and Judgments

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ materially from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future years affected.

During the three months ended March 31, 2021, the global economy continued to show signs of recovery from the impacts of the COVID-19 pandemic. The outlook for crude oil demand has improved due to the easing of restrictions combined with the distribution of vaccines in developed countries. Global spot prices for crude oil have recovered to pre-pandemic levels as optimism for demand recovery improves and OPEC continues to adhere to production curtailments that limit supply. While we have benefited from these recent improvements in crude oil prices there is a degree of uncertainty related to the COVID-19 and OPEC production curtailments that has been considered in our estimates for the period ended March 31, 2021.

3. CORPORATE ACQUISITION

The acquisition has been accounted for using the purchase method based on estimated fair values as follows using discount rates based on what a market participant would have paid:

($ thousands)
Issuance of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of net assets acquired:
Working capital deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

21,247
21,247
(416)
(7,248)
34,883
(5,710)
(176)
11,609
(11,695)
21,247

The fair value of decommissioning provisions were initially estimated using a credit adjusted rate of 6 percent.

4. EXPLORATION AND EVALUATION ASSETS

($ thousands) Balance, beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exploration and evaluation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfers to property, plant and equipment_(note 5)_ . . . . . . . . . . . . . . . Balance, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As at March 31, 2021 6,600 70 (1,588) — 5,082	As at December 31, 2020	As at December 31, 2020
			6,193 847 (168) (272) 6,600

E&E assets consist of Astra’s exploration projects for which the determination of proved or probable reserves is pending. Additions represent Astra’s share of costs incurred on E&E assets during the period. The cost of undeveloped land that expires during a period is recognized in earnings.

Impairment Assessment

In accordance with IFRS, an impairment test is performed if the Company identifies an indicator of impairment. As at March 31, 2021, the Company determined that no indicators of impairment existed on its E&E assets; therefore, impairment tests were not performed.

5. PROPERTY, PLANT AND EQUIPMENT

($ thousands) Cost: Balance, January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized general and administrative costs . . . . . . . . . . . . . . . . . . . Capitalized share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . Transfer from exploration and evaluation assets_(note 4) . . . . . . . . . Right of use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . Corporate acquisition (_note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized general and administrative costs . . . . . . . . . . . . . . . . . . . Change in decommissioning provisions . . . . . . . . . . . . . . . . . . . . . . . Balance, March 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depletion, depreciation and impairment: Balance, January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depletion and depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depletion and depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, March 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net carrying value: Balance, December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, March 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Petroleum and Natural Gas Assets 168,141 12,489 1,026 2 272 — 3,883 34,883 220,695 10,485 213 (826) 230,567 51,525 14,063 65,588 6,127 71,715 155,107 158,852	Office Equipment 157 131 — — — 404 — — 692 11 — — 703 85 140 225 36 261 467 442	Total 168,298 12,620 1,026 2 272 404 3,883 34,883 221,387 10,496 213 (826) 231,270 51,610 14,203 65,813 6,163 71,976 155,574 159,294

Future Development Costs and Salvage Value

At March 31, 2021, future development costs of $131.4 million (December 31, 2020 - $145.4 million) associated with proved plus probable undeveloped reserves are included in costs subject to depletion. An estimated $9.9 million (December 31, 2020 - $9.9 million) of salvage value on production equipment is excluded from the costs subject to depletion.

Impairment

In accordance with IFRS, an impairment test is performed on a Cost Generating Unit (“CGU”) if the Company identifies indicators of impairment. At March 31, 2021, there were no indicators of impairment for the Company’s property, plant and equipment.

It was determined as at March 31, 2020, the carrying value of the Company’s CGU exceeded the recoverable amount which resulted in the Company recording an impairment of $12.3 million.

6. LEASES

The right of use asset is disclosed within property plant and equipment. The activity in the period is summarized below.

Property plant and equipment right-of-use assets ($ thousands) Balance, January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, March 31, 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease liabilities ($ thousands) Balance, January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquired liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, March 31, 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
	Amount
	323 404 (102) 625 (26) 599
	Amount
	333 404 176 35 (79) 869 10 (70) 809

The Company has the following future commitments associated with its lease obligations:

($ thousands) Less than 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . After 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total future lease payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total future interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Present value of the lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . Current portion of lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current portion of lease obligations . . . . . . . . . . . . . . . . . . . . . . . . .	Office lease 213 186 170 — 569 (51) 518 193 325	Surface lease 40 72 48 250 410 (119) 291 25 266	As at March 31, 2021
			253 258 218 250 979 (170) 809 218 591

7. BANK FACILITY

As at March 31, 2021, the Company had available a $40.0 million revolving operating demand credit facility (“Credit Facility”) with a Canadian chartered bank. The Credit Facility provides that advances may be made by way of direct prime rate loans, bankers’ acceptances, letters of credit or letters of guarantee. The Credit Facility bears interest on a grid system depending on the Company’s debt to cash flow ratio ranging from less than or equal to 1:1, to greater than 3:1. The Credit Facility is secured by a $200 million debenture and a general security agreement over all the petroleum and natural gas assets of the Company.

The amount of the Credit Facility is subject to a borrowing base redetermination test performed at least annually, primarily based on reserves, using commodity prices estimated by the lender, as well as other factors. The Company is subject to an adjusted working capital covenant ratio of not less than 1:1 at all times under the Credit Facility. The lender defines the working capital ratio as the ratio of (i) current assets plus any undrawn availability under the Credit Facility but excluding the impact of any financial derivative assets, to (ii) current liabilities excluding any amount drawn under the Credit Facility and excluding any financial derivative liabilities. As at March 31, 2021, the Company was in compliance with all covenants outlined in the credit agreement.

Subsequent to March 31, 2021, the Company’s Credit Facility increased to $50.0 million upon its scheduled borrowing base review. There can be no assurance that the amount of the Credit Facility will not be adjusted at the next scheduled borrowing base review, which is scheduled for November 1, 2021.

8. EMISSIONS REDUCTION FUND

On March 17, 2021, the Company entered into a five-year, interest free term loan agreement with the Federal Government of Canada via the Emissions Reduction Fund (“ERF”) administered by the Department of Natural Resources. The ERF will provide Astra with up to $9.1 million for the Company’s planned gas emission reduction program which will see the Company build infrastructure to eliminate greenhouse gas emissions in specific operating areas. Loan payments will begin on March 31, 2025, when 10% of the repayable portion will be repaid, followed by 33.3% of the loan payable on March 31, 2026 and the remaining 56.7% of the loan payable on March 31, 2027. As at March 31, 2021, no funds were drawn as loan claims made under the ERF were not approved until subsequent to period end.

9. DECOMMISSIONING PROVISIONS

The Company’s decommissioning provisions result from its ownership interest in all its wells and facilities. The total decommissioning provision is estimated based on the Company’s net ownership interest in all of its wells and facilities, estimated costs to reclaim and abandon these wells and facilities and the estimated timing of the costs to be incurred in future years. The Company has estimated the net present value of the decommissioning provisions based on an undiscounted total future provision of $21.6 million (December 31, 2020 - $20.9 million). These payments are expected to be incurred over the next 9 to 25 years. At March 31, 2021, a risk-free rate of 1.97 percent (December 31, 2020 – 1.21 percent) and an inflation rate of 1.69 percent (December 31, 2020 – 1.49 percent) were used to calculate the net present value of the decommissioning provisions.

The following table reconciles the decommissioning provisions:

($ thousands) Balance, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition (note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in estimates (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As at March 31, 2021 18,355 — 173 55 (999) 17,584	As at December 31, 2020	As at December 31, 2020
			8,639 5,710 348 123 3,535 18,355

(1) This amount relates to the revaluation of decommissioning provisions using the period end risk-free rate as well as the revaluation of decommissioning provisions acquired using the risk-free discount rate for the year ended December 31, 2020. At the date of acquisitions, the decommissioning provisions were recorded at fair value.

10. SHARE CAPITAL

Authorized

Issued and Outstanding (thousands) Balance at December 31, 2020, and March 31, 2021 . . . . . . . . . . . . . . . . . . .	Number of shares 66,006	Amount ($)
		78,027

Loss Per Share

Basic and diluted loss per share is calculated as follows:

($ thousands, except per share amounts) Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average Common Shares – basic and diluted . . . . . . Loss per Common Share – basic and diluted . . . . . . . . . . . .	Three Months Ended March 31, 2021 (2,232) 68,006 (0.03)	Three Months Ended March 31, 2020	Three Months Ended March 31, 2020
			(2,542) 55,865 (0.05)

For the periods ended March 31, 2021 and March 31, 2020, the calculation of the diluted net loss per share excludes the effect of all stock options (“Options”) and performance warrants (“Warrants”) as the impact would be anti-dilutive due to the net loss. Therefore, the diluted per share amount for the net loss is equivalent to the basic per share amount.

11. SHARE-BASED COMPENSATION

Performance Warrants

At March 31, 2021, Astra had 11 million Warrants issued and outstanding. As at March 31, 2021, all of the total outstanding Warrants had Dollar Vested.

A summary of the Warrants outstanding is as follows:

(thousands) Balance, December 31, 2020 and March 31, 2021 . . . . . . . . . . . . . . . . .	Performance Warrants
	11,000

A summary of the number of Warrants that vest upon achieving various price thresholds and at various exercise prices is as follows:

Exercise Price

$1.50
$1.75
$2.00
$2.25
$2.50

a) Stock Options

At March 31, 2021, Astra had 5.5 million Options issued and outstanding. As at March 31, 2021, all of the total outstanding Options had Dollar Vested and Time Vested.

Options Outstanding

($ thousands, except per share amounts) Balance, December 31, 2020 and March 31, 2021. . . . . . . . . . . . . . . . . . . . . .	Weighted average exerciseprice $1.00	Stock options
		5,500

The following summarizes the Company’s total share-based compensation related to the Warrants and Options:

($ thousands) Total share-based compensation . . . . . . . . . . . . . . . . . . . . . . . Capitalized share-based compensation . . . . . . . . . . . . . . . . . . . . Total share-based compensation expense . . . . . . . . . . . . . . . .	Three Months Ended March 31, 2021 — — —	Three Months Ended March 31, 2020
		2 (1) 1

12. SUPPLEMENTAL CASH FLOW INFORMATION

($ thousands) Source (use) of cash: Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and deposits . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital . . . . . . . . . . . . . . . . . . . Related to operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . Related to financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . Related to investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . Change in non-cash working capital . . . . . . . . . . . . . . . . . . .	Three Months Ended March 31, 2021 (2,759) 74 5,033 — 2,348 672 (35) 1,711 2,348	Three Months Ended March 31, 2020	Three Months Ended March 31, 2020
			(184) 15 (1,673) (1,858) (3,700) (1,317) — (2,383) (3,700)

13. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company’s financial instruments recognized on the statement of financial position consist of trade and other receivables, income tax receivable, trade and other payables, income tax payable, bank debt and financial derivatives. The carrying value of these financial instruments approximate their fair value due to the short-term nature of the instruments.

Credit Risk

The Company assesses quarterly if there has been any impairment of the financial assets of the Company. For the period ended March 31, 2021, the Company expects to collect all financial assets.

The maximum exposure to credit risk is represented by the carrying amount of trade and other receivables and income tax receivables. As at March 31, 2021, the Company’s receivables consisted of $8.3 million of receivables from petroleum and natural gas marketers ($5.8 million – December 31, 2020), $2.2 million of receivables from partners in jointly owned assets ($1.7 million – December 31, 2020) and $1.4 million from income tax receivables ($1.4 million – December 31, 2020). As at March 31, 2021, there are no material financial assets that the Company considers past due. The Company monitors the age of its receivables, investigating the issue behind past due amounts and reviewing the creditworthiness and collection history of the counterparty. As the operator of the properties, the Company does have the ability in most instances to withhold production from partners who are in default of amounts owing.

Liquidity Risk

Astra anticipates it will continue to have adequate liquidity to fund its financial liabilities through its available debt financing, future issuances of common shares and cash flow from operations. At March 31, 2021, the Company had net debt (defined as bank debt plus working capital deficit, excluding the fair value of financial derivatives and lease liabilities) of $16.4 million (December 31, 2020 - $14.9 million) and a $40 million credit facility, leaving the Company with $23.6 million of undrawn facility.

Subsequent to March 31, 2021, the Company’s credit facility was increased to $50 million.

Market Risk

Foreign Currency Exchange Risk

Interest Rate Risk

Commodity Price Risk

Commodity price risk is the risk that future cash flows will fluctuate as a result of changes in commodity prices. Commodity prices for petroleum and natural gas are impacted by not only the relationship between the Canadian and United States dollar, but also North American and global economic events that dictate the levels of supply and demand. As discussed, the COVID-19 pandemic and the geopolitical crude price war has decreased global crude prices to diminished economic levels. has The Company has attempted to mitigate a portion of the commodity price risk through the use of various financial derivative contracts as outlined below.

The following table presents a reconciliation of the change in the unrealized amounts for the periods ended March 31, 2021 and December 31, 2020:

(thousands) Financial derivative liability, December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized loss on financial derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial derivative liability, March 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current portion of financial derivative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current portion of financial derivative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Fair Value	Fair Value
		(1,666) (4,460) (6,126) 493 (6,619)

As at March 31, 2021, the Company had the following crude oil commodity price contracts in place:

Remaining Period Apr. 1, 2021 – Dec. 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . Apr. 1, 2021 – Dec. 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . Jan. 1, 2021 – Dec. 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . Apr. 1, 2021 – Jun. 30, 2021 . . . . . . . . . . . . . . . . . . . . . . . . Jul. 1, 2021 – Dec. 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . Jan. 1, 2022 – Jun. 30, 2022 . . . . . . . . . . . . . . . . . . . . . . . . Jul. 1, 2022 – Dec. 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . . Apr. 1, 2021 – Dec. 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . Jan. 1, 2022 – Dec. 31, 2022 . . . . . . . . . . . . . . . . . . . . . . . .	Commodity Crude Oil Crude Oil Crude Oil Crude Oil Crude Oil Crude Oil Crude Oil Crude Oil Crude Oil	Contract Quantity Swap 400 bbl/d Swap 500 bbl/d Swap 200 bbl/d Swap 500 bbl/d Swap 500 bbl/d Swap 500 bbl/d Swap 500 bbl/d MSW Differential Swap 1,100 bbl/d Swap 500 bbl/d	Contract Price(1) CAD $58.60/bbl CAD $58.70/bbl CAD $56.45/bbl CAD $62.50/bbl CAD $64.33/bbl CAD $66.82/bbl CAD $66.22/bbl CAD($7.63)/bbl CAD $72.53/bbl	Fair Value March 31, 2021
				1,561 1,937 899 534 715 216 83 972 (791)

(1) NYMEX WTI monthly average converted to Canadian dollars.

Capital Management

These and other factors may adversely affect the Company’s liquidity and the Company’s ability to generate income and cash flows in the future. At March 31, 2021, the Company remains in compliance with the financial covenants contained in the bank facility and based on current available information, management expects to comply with financial covenants during the subsequent twelve month period. However, in light of the current volatility in commodity prices and uncertainty regarding the timing for recovery in such prices, pipeline and transportation capacity constraints, and the effect of COVID-19, the preparation of financial forecasts is challenging.

The Company monitors this ratio and endeavors to maintain it at, or below 1.5 to 1.0 in a normalized commodity price environment. This ratio may increase at certain times as a result of acquisitions or low commodity prices. As shown below, as at March 31, 2021, the Company’s ratio of net debt to annualized cash flow was 0.4 to 1.0 (December 31, 2020 – 0.5 to 1.0).

($ thousands) Current assets_(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: current liabilities(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjusted funds flow from current quarter’s operating activities(3)_ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annualized adjusted funds flow from operating activities . . . . . . . Net debt to annualized adjusted funds flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	March 31, 2021 12,167 (13,055) (15,553) (16,441) 9,398 37,592 0.4	December 31, 2020 9,482 (8,022) (16,397) (14,937) 7,163 28,652 0.5	December 31, 2020 9,482 (8,022) (16,397) (14,937) 7,163 28,652 0.5
			9,482 (8,022) (16,397) (14,937) 7,163 28,652 0.5

(1) Excludes financial derivative asset and liability.

(2) Excludes current lease liability.

(3) Cash flow from operating activities adjusted for change in non-cash working capital and transaction costs.

14. REVENUE

The table details the Company’s petroleum and natural gas sales by product:

($ thousands) Light crude oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Natural gas liquids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Petroleum and natural gas sales . . . . . . . . . . . . . . . . . . . . . . . .	Three months ended March 31, 2021 18,432 195 182 18,809	Three months ended March 31, 2020	Three months ended March 31, 2020
			11,666 8 14 11,688

15. COMMITMENTS

Office Lease

The Company has a lease for office premises that expires in 2025. In addition, the Company acquired a lease for office premises that expires in January, 2022. Future lease payments, including operating cost estimates, are as follows:

($ thousands) Less than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Between one and five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	As at March 31, 2021	As at March 31, 2021
		447 882 1,329

SCHEDULE C TO APPENDIX G

Report on Reserves Data by Independent Qualified Reserves Evaluator and Report of Management and Directors on Oil and Gas Disclosure

(see attached)

FORM 51-101F3 REPORT OF MANAGEMENT AND DIRECTORS ON OIL AND GAS DISCLOSURE

Management of Astra Oil Corp. (the “ Company ”) are responsible for the preparation and disclosure of information with respect to the Company’s oil and gas activities in accordance with securities regulatory requirements. This information includes reserves data, which are estimates of proved reserves and probable reserves and related future net revenue as at December 31, 2020, estimated using forecast prices and costs.

An independent qualified reserves evaluator has evaluated the Company’s reserves data. The report of the independent qualified reserves evaluator is presented below.

The Reserves and Health, Safety and Environmental Committee of the board of directors of the Company has:

reviewed the Company’s procedures for providing information to the independent qualified reserves evaluator;
met with the independent qualified reserves evaluator to determine whether any restrictions affected the ability of the independent qualified reserves evaluator to report without reservation; and
reviewed the reserves data with management and the independent qualified reserves evaluator.

The Reserves and Health, Safety and Environmental Committee of the board of directors has reviewed the Company’s procedures for assembling and reporting other information associated with oil and gas activities and has reviewed that information with management. The board of directors has, on the recommendation of the Reserves and Health, Safety and Environmental Committee, approved:

the content and filing with securities regulatory authorities of the Form 51-101F1 containing reserves data and other oil and gas information;
the filing of Form 51-101F2 which is the report of the independent qualified reserves evaluator on the reserves data; and
the content and filing of this report.

Because the reserves data are based on judgments regarding future events, actual results will vary and the variations may be material.

DATED as of July 16, 2021.

(signed) “Andrew Greenslade” (signed) “Mark Lobello” Andrew Greenslade Mark Lobello President and Chief Executive Officer Vice President, Finance and Chief Financial Officer

(signed) “Ian Fergusson (signed) “Ingram Gillmore” Ian Fergusson Ingram Gillmore Director Director

National Instrument 51-101

Form 51-101F2

Report on Reserves Data by Independent Qualified Reserves Evaluator or Auditor

To the Board of Directors of Astra Oil Corp. (the “Company”):

We have evaluated the Company’s reserves data as at December 31, 2020. The reserves data are estimates of proved reserves and probable reserves and related future net revenue as at December 31, 2020, estimated using forecast prices and costs.
The reserves data are the responsibility of the Company’s management. Our responsibility is to express an opinion on the reserves data based on our evaluation.
We carried out our evaluation in accordance with standards set out in the Canadian Oil and Gas Evaluation Handbook as amended from time to time (the “COGE Handbook”), maintained by the Society of Petroleum Evaluation Engineers (Calgary Chapter).
Those standards require that we plan and perform an evaluation to obtain reasonable assurance as to whether the reserves data are free of material misstatement. An evaluation also assessing whether the reserves data are in accordance with principles and definitions presented in the COGE Handbook.
The following table shows the net present value of future net revenue (before deduction of income taxes) attributed to proved plus probable reserves, estimated using forecast prices and costs and calculated using a discount rate of 10 percent, included in the reserves data of the Company evaluated for the year ended December 31, 2020, and identifies the respective portions thereof that we have audited, evaluated and reviewed and reported on to the Company’s management and Board of Directors:

Independent Qualified Reserves Evaluator or Auditor Sproule Associates Limited . . . . . Total. . . . . . . . . . . . . . . . . . . . . . .	Effective Date December 31, 2020	Location or Reserves (Country) Canada	Net Present Value of Future Net Revenue Before Income Taxes (10% Discount Rate)	Net Present Value of Future Net Revenue Before Income Taxes (10% Discount Rate)	Net Present Value of Future Net Revenue Before Income Taxes (10% Discount Rate)	Net Present Value of Future Net Revenue Before Income Taxes (10% Discount Rate)
			Audited (M$) Nil	Evaluated (M$) 198,775	Reviewed (M$) Nil	Total; (M$)
						198,775

In our opinion, the reserves data evaluated by us have, in all materials respects, been determined and are in accordance with the COGE Handbook, consistently applied. We express no opinion on the reserves data that we reviewed but did not audit or evaluate.
We have no responsibility to update our report referred to in paragraph 5 for events and circumstances occurring after the effective date of our report, entitled “Evaluation of the P&NG Reserves of Astra Oil Corp. (As of December 31, 2020)”.
Because the reserves data are based on judgments regarding future events, actual results will vary, and the variations may be material.

Executed as to our report referred to above:

Sproule Associates Limited Calgary, Alberta

Sproule Associates Limited APEGA Permit Number 00417

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Jun. 29, 2021 Douglas McNichol, P.Eng. Senior Manager, Engineering

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Steven J. Golko, P.Eng. Senior VP, Reservoir Services DATE: Jun. 29 2021 RM APEGA ID #: 80169

SCHEDULE D TO APPENDIX G

Charter of Audit Committee of AOC

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AUDIT COMMITTEE MANDATE

January, 2015

AUDIT COMMITTEE MANDATE

This mandate (the “ Mandate ”) governs the operations of the audit committee (the “ Committee ”) of the Board of Directors (the “ Board ”) of Astra Oil Corp. (the “ Corporation ”). The Committee shall report to the Board.

Purpose

The primary function of the Committee is to assist the Board in fulfilling its responsibilities regarding the integrity of the Corporation’s financial statements including the financial reporting process and systems of internal controls, the compliance by the Corporation with legal and regulatory requirements and the qualifications, performance and independence of the Corporation’s external auditor by reviewing:
(a) the financial information that will be provided to the shareholders, regulatory authorities, if applicable, and others;
(b) the systems of internal controls management has established;
(c) all audit processes; and
(d) all reporting from the external auditors.
Primary responsibility for the financial reporting, information systems, risk management and internal controls of the Corporation is vested in management and is overseen by the Board. While the Committee has the responsibilities and powers set forth in this Mandate, it is not the duty of the Committee to plan or conduct audits or to determine that the Corporation’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. These are the responsibilities of management and the external auditor. Nor is it the duty of the Committee to conduct investigations, to resolve disagreements, if any, between management and the external auditor or to assure compliance with laws and regulations.

Composition and Operations

The Committee shall be composed of not fewer than three directors, none of whom shall be officers, employees or consultants to the Corporation or any of its related legal entities. The Committee shall only be comprised of unrelated directors. An unrelated director is a director who is independent of management and is free from any interest or other relationship which could reasonably be perceived to materially interfere with the director’s ability to act with a view to the best interests of the Corporation as the case may be, other than interests and relationships arising from shareholding. For greater certainty, as of the date hereof, nominee directors of our founding shareholders managed by Annapolis Capital Limited (“ Annapolis ”) and Camcor Partners Inc. (“ Camcor ”) shall be considered unrelated directors for the purposes of this mandate.
The Committee shall review and reassess this Mandate as deemed appropriate.
All Committee members shall be financially literate (as defined by applicable securities laws), or shall become financially literate within a reasonable period of time after appointment to the Committee.
The Corporation’s auditors shall be advised of the names of the Committee members and when appropriate will receive notice of and be invited to attend meetings of the Committee and to be heard at those meetings on matters relating to the auditor’s duties.
The Committee shall meet with the external auditors as it deems appropriate to consider any matter that the Committee or auditors determine should be brought to the attention of the Board or unitholders.
The Committee shall meet at least four times each year.
The Committee shall have access to the Corporation’s senior management and documents as required to fulfill its responsibilities and is provided with the resources necessary to carry out its responsibilities.
The Committee shall provide open avenues of communication among management, employees, external auditors and the Board.
The secretary to the Committee shall be the Corporate Secretary of the Corporation or an appointee of the Corporate Secretary of the Corporation.
Notice of the time and place of every meeting shall be given to each Committee member at least 48 hours prior to the meeting.
Directors representing 2/3 of the voting membership of the Committee present in person or by telephone or other electronic telecommunication device shall constitute a quorum.
The Chief Executive Officer, Vice President Finance and Chief Financial Officer and external auditor would be expected to be available to attend meetings or portions thereof. The external auditors should meet at least once annually with the Committee. Others may or may not attend the meetings at the sole discretion of the Committee.
Minutes of Committee meetings shall be approved by the Committee and sent to all members of the Board.

January, 2015

Duties and Responsibilities

Financial Statements and Other Financial Information
The Committee will review and recommend for approval to the Board financial information that will be made available to shareholders. This includes:
(a) the Corporation’s annual and quarterly financial statements (collectively, the “ Financial Statements ”);
(b) press releases and reports as they relate to the finances of the Corporation, if any;
(c) the management discussion and analysis (the “ MD&A ”); and
(d) any reports required by regulatory or government authorities as they relate to the finances of the Corporation.
The Financial Statements and MD&A must be approved by the Committee prior to dissemination to shareholders.
The Committee will review and discuss:
(e) the appropriateness of accounting policies and financial reporting practices to be adopted by the Corporation;
(f) any significant proposed changes in financial reporting and accounting policies and practices to be adopted by the Corporation:
(g) any new or pending developments in accounting and reporting standards that may affect the Corporation;
(h) ascertain compliance with the covenants under any applicable loan agreements;
(i) management’s key estimates and judgments that may be material to financial reporting; and
(j) any other matters required to be reviewed under applicable legal, regulatory or stock exchange requirements.

Risk Management, Internal Control and Information Systems

The Committee will review and obtain reasonable assurance that the risk management, internal control and information systems are operating effectively to produce accurate, appropriate and timely management and financial information in the context of the size, cycle and nature of the Corporation. This includes:
(a) review management steps to implement and maintain appropriate risk management and internal control procedures;
(b) monitor compliance with statutory and regulatory obligations;
(c) review the appointment of the Vice President, Finance and Chief Financial Officer; and
(d) review the adequacy of accounting and finance resources.

External Audit

The Committee will review the planning and results of external audit activities and the ongoing relationship with the external auditor. This includes:
(a) review and recommend to the Board, for shareholder approval, engagement of the external auditor including, as part of such review and recommendation, an evaluation of the external auditors qualifications, independence and performance;
(b) review and recommend to the Board the annual external audit plan, including but not limited to the following:
1. engagement letter;
2. objectives and scope of the external audit work;
3. procedures for quarterly review of financial statements;
4. materiality limit;
5. areas of audit risk;
6. staffing;
7. timetable; and
8. proposed fees.
(c) meet with the external auditor to discuss the Corporation’s annual financial statements and the auditor’s report including the appropriateness of accounting policies and underlying estimates;

January, 2015

(d) review and advise the Board with respect to the planning, conduct and reporting of the annual audit, including but not limited to:
any difficulties encountered, or restrictions imposed by management during the annual audit;
any significant accounting or financial reporting issue including the resolution of any disagreement between management and the external auditors;
the auditor’s evaluation of the Corporation’s system of internal controls, procedures and documentation;
the post audit or management letter containing any findings or recommendation of the external auditor, including management’s response thereto and the subsequent follow-up to any identified internal control weakness;
assess the performance and consider the annual appointment of external auditors for recommendation to the Board;
(e) review and receive assurances on the independence of the external auditor;
(f) review the non-audit services to be provided by the external auditor’s firm and consider the impact on the independence of the external audit; and
(g) meet periodically with the external auditor without management present.

Other

The Committee will review material litigation and its impact on financial reporting.

Accountability

The Committee shall report its discussions to the Board by distributing the minutes of its meetings and where appropriate, by oral report at the next Board meeting.

Standards of Liability

Nothing contained in this Mandate is intended to expand applicable standards of liability under statutory, regulatory or other legal requirements for the Board or members of the Committee. The purposes and responsibilities outlined in these terms of reference are meant to serve as guidelines rather than inflexible rules and the Committee may adopt such additional procedures and standards as it deems necessary from time to time to fulfill its responsibilities.

January, 2015

APPENDIX H INFORMATION CONCERNING SURGE

NOTICE TO READER

Unless the context indicates otherwise, capitalized terms which are used in this Appendix H and not otherwise defined in this Appendix H have the meanings given to such terms under the heading “ Glossary of Terms ” in the Information Circular.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Appendix H, and in certain documents incorporated by reference into this Appendix H, constitute forwardlooking statements and forward-looking information (collectively referred to herein as “forward-looking statements”) or financial outlooks within the meaning of applicable Canadian securities laws. Such forward-looking statements relate to future events or Surge’s future performance. See “ Forward-Looking Statements ” in the Information Circular. Readers should also carefully consider the matters and cautionary statements discussed under the heading “ Risk Factors ” in the Information Circular, and under the heading “ Risk Factors ” in this Appendix H and the Surge AIF.

DOCUMENTS INCORPORATED BY REFERENCE

Information has been incorporated by reference in the Information Circular from documents filed with securities commissions or similar authorities in Canada . Copies of the documents incorporated herein by reference may be obtained on request without charge from Surge, at Suite 2100, 635-8[th] Avenue S.W., Calgary, Alberta T2P 3M3, Telephone (403) 930-1010. In addition, copies of the documents incorporated herein by reference may be obtained from the securities commissions or similar authorities in Canada through the SEDAR website at www.sedar.com.

The following documents of Surge, filed with the various securities commissions or similar authorities in each of the provinces of Canada where Surge is a reporting issuer, are specifically incorporated by reference into and form an integral part of the Information Circular:

(a) the Surge AIF;
(b) the Surge Annual Financial Statements;
(c) the Surge Interim Financial Statements;
(d) the Surge Annual MD&A;
(e) the Surge Interim MD&A;
(f) the Surge 2021 Information Circular; and
(g) the material change report of Surge in respect of the Arrangement dated July 2, 2021.

Any documents of the type required by National Instrument 51-102 – Continuous Disclosure Obligations and National Instrument 44-101 – Short Form Prospectus Distributions to be incorporated by reference in this Information Circular, including any material change reports (excluding confidential material change reports), comparative unaudited interim financial statements, comparative annual financial statements and the auditor’s report thereon, management’s discussion and analysis, information circulars (excluding those portions that are not required pursuant to National Instrument 44-101 – Short Form Prospectus Distributions of the Canadian Securities Administrators to be incorporated by reference herein) and business acquisition reports filed by Surge with the securities commissions or similar authorities in the provinces of Canada subsequent to the date of the Information Circular and prior to the Effective Date shall be deemed to be incorporated by reference in the Information Circular.

Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purposes of the Information Circular to the extent that a statement contained herein or in any other subsequently filed document which also is, or is deemed to be, incorporated by reference herein modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the Information Circular.

H - 1

SUMMARY DESCRIPTION OF THE BUSINESS OF SURGE

General

Surge’s financial year end is December 31. The Surge Shares, Initial Debentures and Series 2 Debentures are each listed on the TSX under the trading symbols “SGY”, “SGY.DB” and “SGY.DB.A”, respectively.

For further information regarding Surge and its business activities, see the Surge AIF and the other documents incorporated by reference in the Information Circular.

RECENT DEVELOPMENTS

The Arrangement

On June 22, 2021, Surge entered into the Arrangement Agreement with AOC, pursuant to which Surge proposes to acquire all of the issued and outstanding shares of AOC by way of a plan of arrangement under the ABCA. For a full description of the Arrangement and the Arrangement Agreement, see the Information Circular under the heading “ The Arrangement ” and further information relating to AOC is set forth in Appendix G – Information Concerning AOC ”.

Flow-Through Offering and Increase to Credit Facilities

On March 25, 2021, Surge announced the closing of the sale of certain assets for gross proceeds of $106 million and the redetermination of the Surge Credit Facilities. In connection with the redetermination of the Surge Credit Facilities, Surge’s obligation to conduct a sale solicitation process previously contained in the prior credit facilities was eliminated. In addition, the amended Surge Credit Facilities provided that in the event Surge were to complete an issuance of equity securities for gross proceeds of not less than $15 million on or before May 31, 2021, certain additional amendments to the Surge Credit Facilities will be made effective.

On May 13, 2021, Surge announced the closing of a public offering (the “ Flow-Through Share Offering ”) of 38,985,000 Surge Shares, issued as “flow-through shares” within the meaning of the Income Tax Act (Canada), for gross proceeds of $23,001,150. Concurrent with the completion of the Flow-Through Offering, the extension of the maturity date of the Surge Credit Facilities from December 1, 2021 to July 1, 2022 became effective.

Amendment to Credit Facilities

DESCRIPTION OF SHARE CAPITAL

Surge is authorized to issue an unlimited number of Surge Shares and an unlimited number of Surge Preferred Shares, issuable in series, of which 379,594,375 Surge Shares and no Surge Preferred Shares are currently issued and outstanding. Additionally, Surge has $ 79.0 million aggregate principal amount of Surge Debentures outstanding.

For a description of the Surge Shares, the Surge Preferred Shares and the Surge Debentures see “Description of Capital Structure” in the Surge AIF, which is incorporated by reference in this Information Circular.

DIVIDEND POLICY

The Surge Credit Facilities contain restrictions on Surge’s ability to pay dividends. In addition, the payment of dividends by a corporation is governed by the liquidity and insolvency tests described in the ABCA. Pursuant to the ABCA, after the payment of a dividend, a corporation must be able to pay its liabilities as they become due and the realizable value of the assets of Surge must be greater than the liabilities and the legal stated capital of its outstanding securities.

H - 2

On March 9, 2020, Surge announced it was reducing monthly dividend by 90%, from $0.10 per Surge Share per year to $0.01 per Surge Share per year, effective with the March 2020 dividend payable in April 2020. On April 14, 2020, Surge suspended Surge’s dividend program in its entirely. The final cash dividend payment prior to suspension was made on April 15, 2020 for Shareholders of record as at March 31, 2020, as declared on March 16, 2020.

The following monthly cash dividends on Surge Shares were declared in respect of the periods indicated:

		Dividendsper	Common Share	($)
Month	2021	2020	2019	2018
January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	—	0.008333	0.008333	0.007917
February . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	—	0.008333	0.008333	0.007917
March . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	—	0.000833	0.008333	0.007917
April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	—	—	0.008333	0.007917
May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	—	—	0.008333	0.007917
June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	—	—	0.008333	0.008333
July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	—	—	0.008333	0.008333
August . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	—	—	0.008333	0.008333
September . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	—	—	0.008333	0.008333
October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	—	—	0.008333	0.008333
November . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	—	—	0.008333	0.008333
December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	—	—	0.008333	0.008333
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	—	0.017499	0.099996	0.097916

Unless otherwise specified, all dividends paid are designated as “eligible dividends” under the Income Tax Act (Canada).

CONSOLIDATED CAPITALIZATION

On March 25, 2021, Surge announced the redetermination of its syndicated credit facilities, which are currently comprised of (i) a $215 million extendible revolving term, non-revolving term and operating credit facilities of Surge; and (ii) a $40 million non-revolving term credit facility of Surge maturing November 17, 2024, in each case with syndicate of banks led by National Bank.

As at December 31, 2020, Surge had approximately an aggregate of $294 million drawn under the Surge Credit Facilities. As at March 31, 2021, the aggregate amount drawn by Surge under the Surge Credit Facilities was approximately $211 million.

See the Surge Interim Financial Statement and Surge Interim MD&A incorporated by reference in the Information Circular for additional information with respect to Surge’s consolidated capitalization. See also Appendix I - “ Information Concerning Surge Following Completion of the Arrangement – Pro Forma Capitalization ” for the consolidated capitalization of: (i) AOC as at March 31, 2021 before giving effect to the Arrangement; (ii) Surge as at March 31, 2021 before giving effect to the Arrangement; and (iii) Surge as at March 31, 2021 after giving effect to the Arrangement.

PRIOR SALES

Other than as described below, during the 12 month period before the date of this Information Circular, Surge has not issued any other Surge Shares or securities that are convertible or exchangeable into Surge Shares.

Date of Issuance August 15, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . December 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . April 15, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . June 7, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	Number of Securities Issued 13,782,539 7,500 424,636 30,000	Type of Securities Issued Restricted Share Awards / Performance Share Awards Restricted Share Awards Restricted Share Awards Restricted Share Awards	Issue/ Exercise Price (C$) $0.51 $0.28 $0.60 $0.59	Reason for Issuance
				Long term incentive plan Long-term incentive plan Short-term incentive plan New employee hire

In addition, during the 12-month period preceding the date of this Information Circular, an aggregate of 5,140,459 Surge Shares were issued pursuant to the vesting of previously issued Restricted Share Awards and Performance Share Awards.

MARKET FOR SURGE SHARES

The outstanding Surge Shares trade on the TSX under the trading symbol “SGY”. The following table sets out the high and low trading prices and aggregate volume of trading of the Surge Shares for the periods noted below.

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April 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . August 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . September 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . November 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . January 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . February 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . April 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 1 –15, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	High (C$) 0.33 0.32 0.54 0.355 0.355 0.305 0.20 0.33 0.39 0.36 0.58 0.76 0.63 0.62 0.75 0.71	Low (C$) 0.20 0.235 0.26 0.30 0.295 0.185 0.143 0.19 0.275 0.295 0.31 0.495 0.51 0.495 0.57 0.58	Volume (#)
			36,331,017 21,180,626 48,773,178 10,188,258 18,536,129 11,683,939 18,924,044 27,131,909 24,879,662 18,382,997 42,732,579 47,536,911 16,097,753 21,944,004 40,212,145 10,946,869

On June 21, the last trading day on which the Surge Shares traded prior to announcement of the Arrangement, the closing price of the Surge Shares was $0.68. As at July 15, 2021, the last trading day prior to the date of this Information Circular, the closing price of the Surge Shares on the TSX was $0.60.

RISK FACTORS

An investment in Surge Shares is subject to certain risks. Investors should carefully consider the risk factors described under the heading “ Risk Factors ” in the Information Circular and in the Surge AIF and the Surge Interim MD&A, which are incorporated by reference herein. In addition, Surge Shareholders and AOC Shareholders should carefully review and consider all other information contained in the Information Circular together with all other information included or incorporated by reference in the Information Circular, before making an investment decision or a decision to vote for or against the AOC Arrangement Resolution or the Surge Issuance Resolution, as applicable, and consult their own experts where necessary.

ENFORCEMENT OF JUDGMENTS AGAINST FOREIGN PERSONS OR COMPANIES

Mr. Robert Leach, a director of Surge, resides outside of Canada. Mr. Leach has appointed McCarthy Tétrault LLP, 4000, 421 – 7th Avenue S.W., Calgary, Alberta T2P4K9 as his agent for service of process in Alberta. Potential investors of Surge are advised that it may not be possible for investors to enforce judgments obtained in Canada against a person that resides outside of Canada, even if the party has appointed an agent for service of process.

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LEGAL PROCEEDINGS AND REGULATORY ACTIONS

Surge is involved in various claims and litigation arising in the ordinary course of business. While the outcomes of these matters are uncertain and there can be no assurance that such matters will be resolved in Surge’s favour, Surge does not currently believe that the outcomes of adverse decisions in any pending or threatened proceedings related to these or other matters or any amounts which it may be required to pay by reason thereof would have a material adverse impact on its financial condition, results of operations or liquidity.

INTERESTS OF INFORMED PERSONS IN MATERIAL TRANSACTIONS

Other than as disclosed in the Information Circular or in any of the documents incorporated by reference in the Information Circular, Surge is not aware of any material interests, direct or indirect, by way of beneficial ownership of securities or otherwise, of any director or executive officer or any shareholder of Surge holding more than 10% of the Surge Shares or any associate or affiliate of any of the foregoing in any transaction within the three most recently completed financial years or during the current financial year or any proposed or ongoing transaction of the Surge which has or will materially affect Surge.

KPMG LLP are the auditors of Surge and have confirmed that they are independent with respect to Surge within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and any applicable legislation or regulations.

AUDITORS, TRANSFER AGENT AND REGISTRAR

KPMG LLP is the current auditor of Surge and have confirmed that they are independent with respect to Surge within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and any applicable legislation or regulations.

The transfer agent and registrar for Surge Shares is Odyssey Trust Company at its principal office in Calgary, Alberta.

ADDITIONAL INFORMATION

Additional information regarding Surge may be found on SEDAR at www.sedar.com . Financial information in respect of Surge and its affairs is provided in Surge Annual Financial Statements, Surge Interim Financial Statements, Surge Annual MD&A and Surge Interim MD&A. Copies of Surge’s financial statements and related management’s discussion and analysis are available upon request from the Vice President, Finance of Surge, at Suite 2100, 635 – 8[th] Avenue S.W. Calgary, Alberta, T2P 3M3, telephone number (403) 930-1046.

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APPENDIX I

SECTION 191 OF THE BUSINESS CORPORATIONS ACT (ALBERTA)

AOC Shareholders have the right to dissent in respect of the Arrangement in accordance with Section 191 of the ABCA (as varied by the Interim Order). Such rights of dissent are described in the Information Circular under the heading “ The Arrangement – AOC Dissent Rights ”. The full text of Section 191 of the ABCA is set forth below.

191(1)Subject to sections 192 and 242, a holder of shares of any class of a corporation may dissent if the corporation resolves to

(a) amend its articles under section 173 or 174 to add, change or remove any provisions restricting or constraining the issue or transfer of shares of that class,

(b) amend its articles under section 173 to add, change or remove any restrictions on the business or businesses that the corporation may carry on,

(b.1) amend its articles under Section 173 to add or remove an express statement establishing the unlimited liability of shareholders as set out in Section 15.2(1),

(c) amalgamate with another corporation, otherwise than under section 184 or 187,
(d) be continued under the laws of another jurisdiction under section 189, or
(e) sell, lease or exchange all or substantially all its property under section 190.

(2) A holder of shares of any class or series of shares entitled to vote under section 176, other than section 176(1)(a), may dissent if the corporation resolves to amend its articles in a manner described in that section.

(3) In addition to any other right he may have, but subject to subsection (20), a shareholder entitled to dissent under this section and who complies with this section is entitled to be paid by the corporation the fair value of the shares held by the shareholder in respect of which the shareholder dissents, determined as of the close of business on the last business day before the day on which the resolution from which the shareholder dissents was adopted.

(4) A dissenting shareholder may only claim under this section with respect to all the shares of a class held by the shareholder or on behalf of any one beneficial owner and registered in the name of the dissenting shareholder.

(5) A dissenting shareholder shall send to the corporation a written objection to a resolution referred to in subsection (1) or (2)
(a) at or before any meeting of shareholders at which the resolution is to be voted on, or
(b) if the corporation did not send notice to the shareholder of the purpose of the meeting or of his right to dissent, within a reasonable time after the shareholder learns that the resolution was adopted and of the shareholder’s right to dissent.
(6) An application may be made to the Court after the adoption of a resolution referred to in subsection (1) or (2),
(a) by the corporation, or
(b) by a shareholder if the shareholder has sent an objection to the corporation under subsection (5)

to fix the fair value in accordance with subsection (3) of the shares of a shareholder who dissents under this section, or to fix the time at which a shareholder of an unlimited liability corporation who dissents under this section ceases to become liable for any new liability, act or default of the unlimited liability corporation.

(7) If an application is made under subsection (6), the corporation shall, unless the Court otherwise orders, send to each dissenting shareholder a written offer to pay the shareholder an amount considered by the directors to be the fair value of the shares.

(8) Unless the Court otherwise orders, an offer referred to in subsection (7) shall be sent to each dissenting shareholder
(a) at least 10 days before the date on which the application is returnable, if the corporation is the applicant, or
(b) within 10 days after the corporation is served with a copy of the application, if a shareholder is the applicant.
(9) Every offer made under subsection (7) shall
(a) be made on the same terms, and

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(b) contain or be accompanied with a statement showing how the fair value was determined.

(10) A dissenting shareholder may make an agreement with the corporation for the purchase of the shareholder’s shares by the corporation, in the amount of the corporation’s offer under subsection (7) or otherwise, at any time before the Court pronounces an order fixing the fair value of the shares.

(11) A dissenting shareholder
(a) is not required to give security for costs in respect of an application under subsection (6), and
(b) except in special circumstances must not be required to pay the costs of the application or appraisal.
(12) In connection with an application under subsection (6), the Court may give directions for

(a) joining as parties all dissenting shareholders whose shares have not been purchased by the corporation and for the representation of dissenting shareholders who, in the opinion of the Court, are in need of representation,

(b) the trial of issues and interlocutory matters, including pleadings and questioning under Part 5 of the Alberta Rules of Court ,
(c) the payment to the shareholder of all or part of the sum offered by the corporation for the shares,
(d) the deposit of the share certificates with the Court or with the corporation or its transfer agent,
(e) the appointment and payment of independent appraisers, and the procedures to be followed by them,
(f) the service of documents, and
(g) the burden of proof on the parties.
(13) On an application under subsection (6), the Court shall make an order
(a) fixing the fair value of the shares in accordance with subsection (3) of all dissenting shareholders who are parties to the application,
(b) giving judgment in that amount against the corporation and in favour of each of those dissenting shareholders,
(c) fixing the time within which the corporation must pay that amount to a shareholder, and

(d) fixing the time at which a dissenting shareholder of an unlimited liability corporation ceases to become liable for any new liability, act or default of the unlimited liability corporation.

(14) On:

(a) the action approved by the resolution from which the shareholder dissents becoming effective,

(b) the making of an agreement under subsection (10) between the corporation and the dissenting shareholder as to the payment to be made by the corporation for the shareholder’s shares, whether by the acceptance of the corporation’s offer under subsection (7) or otherwise, or

whichever first occurs, the shareholder ceases to have any rights as a shareholder other than the right to be paid the fair value of the shareholder’s shares in the amount agreed to between the corporation and the shareholder or in the amount of the judgment, as the case may be.

(15) Subsection (14)(a) does not apply to a shareholder referred to in subsection (5)(b).

(16) Until one of the events mentioned in subsection (14) occurs,
(a) the shareholder may withdraw the shareholder’s dissent, or
(b) the corporation may rescind the resolution,

and in either event proceedings under this section shall be discontinued.

(17) The Court may in its discretion allow a reasonable rate of interest on the amount payable to each dissenting shareholder, from the date on which the shareholder ceases to have any rights as a shareholder by reason of subsection (14) until the date of payment.

(18) If subsection (20) applies, the corporation shall, within 10 days after
(a) the pronouncement of an order under subsection (13), or

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(b) the making of an agreement between the shareholder and the corporation as to the payment to be made for the shareholder’s shares,

notify each dissenting shareholder that it is unable lawfully to pay dissenting shareholders for their shares.

(19) Notwithstanding that a judgment has been given in favour of a dissenting shareholder under subsection (13)(b), if subsection (20) applies, the dissenting shareholder, by written notice delivered to the corporation within 30 days after receiving the notice under subsection (18), may withdraw the shareholder’s notice of objection, in which case the corporation is deemed to consent to the withdrawal and the shareholder is reinstated to the shareholder’s full rights as a shareholder, failing which the shareholder retains a status as a claimant against the corporation, to be paid as soon as the corporation is lawfully able to do so or, in a liquidation, to be ranked subordinate to the rights of creditors of the corporation but in priority to its shareholders.

(20) A corporation shall not make a payment to a dissenting shareholder under this section if there are reasonable grounds for believing that
(a) the corporation is or would after the payment be unable to pay its liabilities as they become due, or
(b) the realizable value of the corporation’s assets would by reason of the payment be less than the aggregate of its liabilities.

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TIME IS OF THE ESSENCE. PLEASE VOTE TODAY.

Surge Shareholder Questions may be directed to:

North American Toll-Free 1-888-637-5789 Banks and Brokers and collect calls outside North America 647-931-7454

Email at [email protected] | www.shorecrestgroup.com

AI assistant

Surge Energy Inc. — Proxy Solicitation & Information Statement 2021

44672_rns_2021-07-19_2022d3aa-f53f-431a-8563-931687b501fc.pdf

– AND –

– AND –

– AND –

JOINT MANAGEMENT INFORMATION CIRCULAR

WITH RESPECT TO A PROPOSED PLAN OF ARRANGEMENT INVOLVING

SURGE ENERGY INC.,

ASTRA OIL CORP. AND

TABLE OF CONTENTS

ENCLOSURES

LETTER TO AOC SHAREHOLDERS

The AOC Board unanimously recommends that the AOC Shareholders vote FOR the AOC Arrangement Resolution.

LETTER TO SURGE SHAREHOLDERS

The Surge Board unanimously recommends that the Surge Shareholders vote FOR the Surge Issuance Resolution and FOR the Surge Share Consolidation Resolution.

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF ASTRA OIL CORP.

TO BE HELD ON AUGUST 17, 2021

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF SURGE ENERGY INC.

TO BE HELD ON AUGUST 17, 2021

JOINT MANAGEMENT INFORMATION CIRCULAR

GENERAL INFORMATION

Introduction

Information Contained in this Information Circular

Cautionary Notice Regarding Forward-Looking Statements and Information

Information for Beneficial Shareholders

Internet Voting

Telephone Voting

Information for United States Shareholders

Conventions

Non-GAAP Financial Measures

NOTES ON RESERVES DATA AND OTHER OIL AND GAS INFORMATION

Abbreviations

Other

Conversions

Caution Respecting Reserves Information

Caution Respecting Boe

Definitions

Reserves

Interests in Reserves, Production, Wells and Properties

Description of Exploration and Development Wells and Costs

GLOSSARY OF TERMS

“ AOC Supporting Shareholders ” means, together: (i) the AOC D&O Shareholders; and (ii) the AOC Lock-Up Shareholders.

“ CDS ” means CDS Clearing and Depository Services Inc.

“ Competition Act Approval ” means:

“ Governmental Authority ” means any:

SUMMARY INFORMATION

The Corporations

AOC

Surge

The AOC Meeting

The Surge Meeting

Background to the Arrangement

Reasons For the Arrangement

AOC Board

Surge Board

AOC Supporting Shareholders

Recommendations of the AOC Board

Recommendations of the Surge Board

Effect of the Arrangement

General

Effect on AOC Options and AOC Warrants

Details of the Arrangement

Arrangement Steps

Directors and Management of Surge following Completion of the Arrangement

The Arrangement Agreement

Covenants, Representations and Warranties

Conditions to the Arrangement

Termination of Arrangement Agreement

Risk Factors Related to the Arrangement

Procedure for Exchange of AOC Shares

AOC Shareholders whose AOC Shares are registered in the name of an Intermediary, which may include a broker, investment dealer, bank, trust company, nominee or other Intermediary, must contact their Intermediary for instruction to make an election and to deposit their AOC Shares.

AOC Shareholder Approval

Surge Shareholder Approval

Surge Issuance Resolution

Surge Share Consolidation Resolution

Surge Credit Facilities

AOC Fairness Opinion

Final Order

Dissent Rights

Surge Energy Inc. Proxy Solicitation & Information Statement 2021